Friday, May 15, 2009

Abercrombie & Fitch Suspect Dividend Strategy

Abercrombie & Fitch (ANF) announced Q1 results which reflect the terrible retail environment. In all honesty no one was really surprised by the red ink. What is surprising is the continued declaration of the cash dividend in the face of very large losses. ANF’s cash position may appear comfortable but the economic situation will probably cause continued shrinkage.

Mike Jeffries, Chief Executive Officer and Chairman of the Board of Abercrombie & Fitch Co., said”.... This year will be a transitional year for us as we continue to focus our efforts on laying the groundwork for our long term success and prosperity by protecting our brands, preserving cash and pursuing our international growth opportunities."

The CEO is trying to have his cake and eat it also. Visibility is poor but ANF has not been successful in reducing costs quickly enough to get margins back in line. That should not generate a dividend for investors.

Thursday, May 14, 2009

Timminco Prepares Investors for Shearing

Timminco (TSE:TIM) has come out with a string of bad news. Some new executives have been brought in. The controlling shareholder had to put in another $15 million. No one is saying that this is enough to fix the problems. Clients are upset with contracts. Asensio has been critical in the past and Globe and Mail has noticed the ineptness of management. Shareholders are meeting and you have to ask yourself will they elect the same board of directors and confirm the same senior managers or do they like getting sheared? We will have to see.

Wednesday, May 13, 2009

Liz Claiborne Continues To Worry

Liz Claiborne (LIZ) announced Q1 earnings and for a retailer in this environment were not bad. The consumer is not as fashion conscious at the present time. They seem to be doing the right things, reducing inventories and bringing in some top industry guns as well as launching some new brands/lines.

They also negotiated their revolving credit agreement but the press release contained some very vague information as to what the covenants are. So it really is impossible to understand how the deal will work. Liz is highly leveraged despite large debt reductions. There is a great deal of seasonality in its financing. The big event is always the fall and Christmas season. If they blow it then they will destabilize.

Add to the volatile mix a horrendous economy and you have a poorly capitalized company that is not explaining to investors how their credit works. As William L. McComb, Chief Executive Officer of Liz Claiborne Inc., said: , "Our outlook for the balance of the year remains unchanged. We expect comp store sales declines"

Tuesday, May 12, 2009

Playboy - Sex No Longer Sells

Playboy Enterprises (PLA) announced some more red ink. New management is in place and cost cutting all around. NYSE is sending letters that their market cap is too small. Advertising revenues are down here as well as with every magazine. Playboy is proving that sex does not sell. Hugh Hefner is still residing in the Playboy Mansion in LA. The real estate seems to have been a good investment. What does Hefner add at this point? The press release’s keep making the point that Playboy is one of the most recognizable consumer brands. Powerful brands make money. This one does not. Watch for a chapter 11 to restructure costs.

Neenah Paper - Storm Clouds Gathering

Neenah Paper (NP) reported a loss for Q1 as opposed to profits last year this time. Not unexpected given the drop in demand for their product. They do seem to be approaching cost reduction effectively. But one wonders about the future and some of the explanations that the executive are using. Read this quote from Sean Erwin, Chairman and Chief Executive Officer “In addition, we continue to invest in our brands and products and work closely with customers to support our long-term competitive position.”

Then we go on to read that SG&A costs are down “....$16.3 million in the first quarter 2009 was below the prior year level of $21.2 million due to reductions in spending.”

The dots do not connect properly. It’s almost a throw away comment to say that you are investing in brands and products. But when you declare spending reductions in the same category you have to wonder are storm clouds gathering.

Monday, May 11, 2009

Cox Radio Buy Low Sell High

Cox Radio (CXR) reported quarterly results and naturally made them look fairly bad. Yes the radio advertising market is in tough shape. But Cox Enterprises sees the benefit of buying this asset. The fact that there is an offer on the table should not prohibit the executives from talking about the business. But not a word about the results has been presented. They just provide the numbers and move on.

The secret to investing is to buy low and sell high. Cox Radio is being bought low. Therefore the investor is not selling high.