Friday, October 27, 2006

Tim's Operating Profits Shrink

Tim Hortons (NYSE:TSI) reported higher sales but lower operating income. The drop is blamed primarily on issues relating to Wendy’s sale such as expensing of stock options. The problems in ramping up the Guelph distribution facility are disturbing and have not been adequately discussed. Management points to strong same store sales. They also expect to open 100 new stores in Q4. This surge will eventually drive same store sales and then stall it. Many of the new stores will be the smaller stripped down counters and not the full fledged outlets. The markets will be smaller and therefore more vulnerable to rapidly changing micro demographics such as pedestrian traffic. Tim’s growth can best be expected from menu expansion such as their new breakfast sandwich. Precious little insight has been offered in this area.

Thursday, October 26, 2006

Radio shack Overheads Still Fat

RadioShack Corporation (NYSE: RSH ) announced net losses mainly attributable to restructuring and lower store count. But take a look at SGA costs. In Q3 they just managed to knock it down by 1%. For the nine months year to date SGA is still increasing by a whopping 6.8%. Radio Shack needs to cut overheads as fast if not faster than operating issues.

Wednesday, October 25, 2006

Even Moody's Does It

The Board of Directors of Moody's Corporation (NYSE: MCO) declared a regular quarterly dividend of 7 cents per share. The dividend is payable Dec 10 to shareholders at the close of Nov 20. Dividends are an indication of financial health. Moody’s should understand the implications of such an announcement if anyone does. But the announcement is just thrown out without any commentary. On Oct 11 Moody’s announces that on Oct 25 they will announce quarterly results. On Oct 24 they announce the dividend a day before the complete quarterly report. On Oct 24 the stock dropped 2.57%. Of course there was a spike last Tuesday of about the same. I have a personal suspicion of the wide-spread practice of announcing dividends before earnings. If dividends are the last item in the income statement then they should not be announced first before investors can actually see the real results. Moody’s should get this!

Tuesday, October 24, 2006

Netflix acquisition Costs Soar

Netflix, Inc. (Nasdaq: NFLX) reported boomer Q3 results with what appears to be real increases in profitability. When companies grow so quickly investors need extra doses of caveat emptor. Look at what they are reporting about their own acquisition costs. “Subscriber acquisition cost (4) for the third quarter of 2006 was $45.32 per gross subscriber addition, compared to $36.33 for the same period of 2005 and $43.95 for the second quarter of 2006.” Acquisition costs are growing rapidly in percentage terms. A 25% increase in comparable quarters is huge. There is a good chance that they will be buried in acquisition and retention costs as they try to attract and keep clients. Could become a mug’s game.

Monday, October 23, 2006

Novell's Three Strikes

Novell (Nasdaq:NOVL) continues to experience ongoing lawsuits regarding granting of stock options. This time the Board of Directors stand accused of serious wrong doing. The third major securities class action lawsuit has been filed by San Diego's Lerach Coughlin Stoia Geller Rudman & Robbins. The suit continues on to accuse the current executives, board of directors and former CEO and chief financial officer of fraudulent accounting from 1999 to 2006. Who is left at Novell that is not directly implicated in serious corporate governance failure. Look for someone to take over this wounded situation. But should they pay any premiums?