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Non-Tech : Just For Feet (FEET)
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To: RICK SCHINZEL who wrote (322)9/3/1997 10:36:00 AM
From: Walter High   of 750
 
Rick:

This is a really difficult call right now. FEET was really charging ahead over the last twor or three years with a good plan in place and excellent management as it expanded rapidly. It ran afoul of the accountants with a bookkeeping trick that caused a big drop in the stock price (32 to 16 for all practical purposes). The change in accounting practices reduced the growth rate that had been reported.

FEET might have recovered from this OK after the accounting problem washed thorugh the books, but it embarked upon the acquisitions binge that brought it two mall-based chains and ate away at the cash-rich balance sheet it had been sporting. Some of us believe that the move to buy the mall-based stores was a mistake as it undercut the basic premise of FEET: that mall-based stores were too small and expensive to operate and that a superstore concept could be a category killer based on volume and selection.

The question now is whether FEET can recover from this problem at a time when the retail shoe industry seems to be in somewhat of a slump. If FEET can straighten out the problems and continue on its growth path, it is easily a $20+ stock. If the balance sheet gets in trouble and the mall stores suck up the ready cash, this stock can go lower. We won't know that answer to this for maybe six months at least. The fact that FEET is borrowing money is not promising.

If you really want to be in the stock, but want it cheap, sell a naked put for October at the 15 strike price. I haven't checked it recently, but you will most likely be put the stock as it won't cross 15 by then and you will pay 15 but get to keep the premium which is 2 right now. That would give you the stock at an effective price of 13. If it takes a plunge before October 17th, you can always buy back the put and get out cheap without taking delivery of the stock.

Good luck.

Walter High
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