Saturday, May 23, 2009

Citigroup Dreams About IT Savings

Citigroup (C) through an article in the Financial Times and Deal Book let it be known that they think they can save $1Billion by integrating IT. Sounds great. But as anyone knows IT integration comes with a huge price tag. Compelling as it sounds IT integration is fraught with operating difficulties. There are many good reasons why companies such as Citi avoided doing it. They wanted to avoid the risk as well as the costs. Citi is on its hands and knees and needs to raise capital, reduce toxic assets and sell off parts of the corporate body. When they look at the price tag of IT integration I am not sure they will be able to put their finger on where the $1 Billion is coming from and when.

Friday, May 22, 2009

Playboy Who will Pay a 300% Premium

Playboy (NYSE:PLA) is shopping itself for $300 million but trades at $100 million. Tough to justify the premium. Hefner says he would not let it go for anything less. Hef you are an old man who has lived well and hard. You are around 80 and will probably pass away in a few years. Your estate will have to settle for less just to pay the taxes. You are disrespecting the other shareholders by your intransigence. Does the board not play a role here? The stock has dropped dramatically. The last few bus drivers did not create shareholder value. When will the remaining shareholders sue? Wealth has been destroyed not created.

Thursday, May 21, 2009

Deere Stands By Price Realization

Deere (NYSE:DE) sent the following email about my post about price realization. They felt the comments were harsh to say the least. My approach is plain talk. Price realization is not generally recognized and adds more to the confusion than to the clarity. They claim to be using the term for quite some time and I’ll give them that. But in today’s tough economic times everything is being scrutinized that much more closely so maybe the old terminology does not serve us well.


I noticed your comments concerning the term "price realization" in Deere & Company's earnings release today. Contrary to what you would have your readers believe, Deere did not make up a new term and it certainly is not the first time it has been used by the company. I have been in the role of company spokesperson for a decade and we have referred to "price realization" in our quarterly earnings news releases during that entire ten years. Included below are a few other organizations also using the term. These are links I grabbed in a quick search if the Internet. You have misled your readers to believe Deere is up to some sort of financial term hocus pocus. A consistent observer of the company would realize the term has been part of our public communication for a long period of time.




Ken Golden
Director, Strategic Public Relations | Deere & Company
309-765-5678 (office) | 309-230-7626 (mobile)

Limited Brands Limited Information

Limited Brands (NYSE:LTD) reported quarterly earnings by throwing some numbers out and including no substantive commentary about results. The bare bones approach was appalling. Investors relying on this press release do not have enough information to make a buy, sell or hold decision. If the board only receives this abbreviated level of information they do not have enough information to do their job.

Wednesday, May 20, 2009

Ann Taylor Looks To The Fall

Ann Taylor (NYSE:ANN)can't see the forest because of the trees or maybe its the other way around. Read this quote in their earnings release about their future product offerings "....In addition, the comparable store sales results at Ann Taylor continued to reflect an assortment that has not yet been repositioned to the modern, chic and sophisticated point of view that will be launched this Fall...”

OK so why did you not come up with a compelling line up for now.

Deere and Price Realization

Deere (NYSE:DE) has come up with a new way to talk about price increases. Read today’s press release carefully and you will see they keep referring to "improved price realization". Hey if you can sell for a higher price that’s great. We are all capitalists here so no one should be embarrassed. But of course it allows you to sanitize the whole price and margin discussion and provides management with improved wiggle room if, as and when prices drop for some reason.

We need clarity in communication not increased buzzwords.

Tuesday, May 19, 2009

TJX Constant currency Dilemna

The TJX Companies Inc (TJX) reported encouraging results for a retailer in a dismal economy. Kudo’s to management on many issues. But the foreign exchange issue remains too cloudy and not properly understood by investors. TJX is a large global company buying goods everywhere and selling goods around the world. Foreign exchange is critical and if not managed correctly can wipe out profits overnight. So read this quote from the earnings release.

Additionally, the Company routinely enters into inventory-related hedging instruments to mitigate the impact of foreign exchange on merchandise margins when the Company’s international divisions purchase goods from U.S. sources. For accounting purposes, there is a mark-to-market adjustment on the hedging instruments at the end of each quarter. While these adjustments occur every quarter, they are of much greater magnitude when there is significant volatility in currency exchange rates.”

Carol Meyrowitz, President and Chief Executive Officer of The TJX Companies, Inc. had started the press release buy saying that he was pleased with the quarter. So the question becomes is the hedging program working. FX rates fluctuate; we all know that. They claim the hedge program is focused on the merchandise margins. Interesting use of words. Are you not hedging the entire exposure of your obligations? Once the hedge is in place they revalue quarterly on a mark to market basis. But what about the transaction that was hedged in the first place? Would it not make sense to mark it to market also? The point of a hedge is to be neutral and eliminate any additional risks. Also if the company is settling accounts on a monthly basis how long do the hedges go on for?

The press release went on at great lengths to describe the FX hedge program but really does not allow the investor to analyze its effectiveness. Hedge instrument make the market nervous. These guy’s are retailers; do they have the skill set to manage this risk? Given that they are not properly explaining the risk leads one to wonder if they have this one covered. They claim to have a link that provides a table of explanation. The link is to the front page of their corporate web site not to the specific information they claim to be providing.

The company as previously announced is now reporting on a constant currency basis. This assumes that currencies stay constant. We all know that currencies fluctuate. If you have significant global operations you will have foreign exchange risk. Therefore this concept of constant currency only serves to mask the risk. When do you adjust the books to reflect the realities of fluctuating currencies.

Monday, May 18, 2009

Monster Settles With SEC

Monster (NYSE:MWW) settled with the SEC and paid a fine of $2.5 million relating to option back-dating. While everyone realizes that they now have new management the shareholder is still being penalized. Headlines all point to previous executives being found guilty by jury. I have not yet been able to find any reference of Director and Officer Liability insurance covering some or all of the costs. Does the investor have to suck up everything.

Lowes Still Has Its Problems

Lowes (NYSE:LOW) reported news that was framed as encouraging and the stock popped up some. It even brought Home Depot (NYSE:HD) up with it for the ride. They claim improved margins primarily as a result of small outdoor projects; which essentially means a lot of people are buying purple petunias and potting soil. Nice but this will not create a long term wealth effect.

The level of inventories is higher than comparables from last year. When your comparable store sales are dropping by 6.6% you cannot keep your inventories up high.

Not out of the woods as yet. Management did not speak to real issues in the press release.

Listen to Robert A. Niblock, Lowe's chairman and CEO. "In addition, solid gross margin growth combined with appropriate expense management allowed us to deliver earnings per share above our guidance for the quarter.”

SG&A is up in both percentage terms and absolute terms. So what is the CEO talking about? Their SG&A is still not in line with historical levels. They still have not cut overheads to where they need to be

Sunday, May 17, 2009

Liz Claiborne Taken Aback by Financial Skeptic

Liz Claiborne (LIZ) taken aback by Financial Skeptic. Following my post about Liz Claiborne’s lack of details regarding its credit arrangement I received the below captioned email indicating they were taken aback by my comments. Here is the deal: In the press release they provide dense comments that tell you nothing, in the conference call they say they provided adequate disclosure. So why not put in adequate disclosure into the press release and avoid this Easter egg hunt dynamic where investors need to look here and then look there and then look in their basket and truly wonder if the have it all. I am not saying these guys are criminal but they are not helpful. When you say something in public it should be understood. Liz Claiborne’s press release was not sufficiently understandable and it easily could have been.

Here is the email. I’ll let you go to the IR portion of the web site and make your own conclusions about adequacy. Sounds like the information on the conference call was more substantial than on the press release which is not good.

I saw the blog you wrote after our conference calls. I was alarmed at your note that we did not provide access to, or clarity around, the latest amendment to our bank deal. We did, in fact, discuss at length during our conference call the dynamics of the new deal and how it works, in addition to having filed a full 8-K with the actual amendment in it. Please review those materials. We pride ourselves on the transparency in our reporting, and we wee taken aback by your comment.

William L. McComb, Chief Executive Officer | 212 626 3400
1441 Broadway, 21st Floor | New York, NY 10018
Assistant: Diane Fennelly | 212 626 3442