Wednesday, March 25, 2009

Jabil Drip Disclosure

Jabil (JBL) announced their earnings and would have you believe that cash flow is healthy, cash position is strong and they are weathering the current difficulties rather well. Quarter ends on feb 28, 2009. Then they let this one out. Potential goodwill impairment appears likely and they are doing the tests. They claim the impairment is being triggered because the stock is dropping and the economy does not look good. Thanks for that.

The impairment charge will be effective Feb 28, 2009 but disclosed in April; so the numbers you are supposed to rely on will change. But this seems OK under disclosure because they are announcing that their disclosure will be modified by future disclosure. Reg FD covered by a shroud.

But in all this confusion about difficult markets, changing valuations the dividend remains unchanged. Unless they change it in the future. But right now they have not announced any changes.

If you can understand this post (for whatever reason) just sit and think about thinks. Now is not the right time to make any major moves anywhere.

Tuesday, March 24, 2009

Williams Sonoma Dividend Wisdom

Williams Sonoma (WSM) announces Q4 results and year end. I must be fixated on retailers lately or are they just he canary in the coal mine. Anyway the numbers are difficult to terrible. They announce a few initiatives to improve. With a lot of jargon and buzzwords they talk about inventory control and improving the catalogue operation. They plan on cutting expenses wherever possible. The margins narrowed as sales revenue dropped faster than expenses could be cut out. Hopefully on the way up revenues will rise faster than expenses.

The interesting strategy is their insistence on paying a dividend. The current cash position looks good and they can cut the cheque quite easily. The question becomes is the strategy of paying a dividend in difficult times properly aligned with whatever strategies will be needed to position for the future.

Williams Sonoma has cash which can be used to gain strategic advantage for the future. Many retailers and businesses can only dream of this luxury. Did investors buy this stock for dividend yield (probably not) or do they want to look to the future for growth. The question that is begged "Does the board have the necessary vision for the next cycle or are they just fiddling with today's details"

Monday, March 23, 2009

Tiffany's Special Sparkle

Tiffany's announced Q4 numbers and as you would expect from a retailer of beautiful but un-necessary baubles, sales are off. Way off. Bauble are sill beautiful but here are a few things that are not so beautiful in the press release.

Everyone knows the economy stinks. Read how carefully the words are crafted. Before any substantive numbers are reported they lay out this sentence in the first paragraph "The quarter’s sales were in line with previously-reported holiday season results. This sales performance, combined with a lower operating margin, led to a decline in fourth quarter earnings as expected."

Sounds like everything is under control. Admittedly its not a good year but we are managing quite well. The annual numbers are not bad. Q4 sales are off by 20%.

20% should have been foreseen. They are now caught by an inventory bulge and they have taken on huge amounts of debt. They claim to be positioning themselves for the future. But the huge debt levels, ballooning pension liabilities and bloated inventories do not match the soothing sultry tone of executive comments.

Yes the economy is a major factor. Tiffany"s got it wrong and seems to be still getting it wrong. They did not expect this decline, otherwise they would have put it into reverse much sooner.