I was on a business trip last week to a new city, I had some free time so I went to a local mall, the biggest in the area. There was a Claire's store, across from it was a Icing store with the same merchandise 30 feet away. Claire's talks about new stores growth however adding stores to an already saturate mall troubles me for obvious reasons. Secondly last Jan when they announced the stock buyback the stock was trading in the 10-11 range, it stayed in this
range long enough for Claire's to complete their scheduled 1 mil share buyback. My opinion, this was a tool used to stablize the down trend of the stock and they were not serious about the actual buyback. This
appears 1-2 times in previous years with the same results an extremely small buyback.
In regards to expansion Claire's has tried and failed many times to get into new businesses, ie Arcadia, Art Explosion, Dara Michele. Stumbling block, the initial margins are much lower than claire's
given Claire's model concept business cannot work unless they achieve high gross margins. Worldwide expansion hinges upon acceptance of our teen trends throughout the world. If you are a world traveler you can see the difficulty in this idea.
The only acquisition available in the US market, Afterthoughts owned by the Woolworth Corp, same malls same concept, terrible execution.
They don't need them...
What has me concerned is that Claire's store model concept is getting old and tired, some stores are 10 years old new teen trends have evolved beyond this look. Same store sales are in a long term trend down.
Rowland Schaefer is over 80, he is the driving force behind this business, after him there will be anarchy. Remember they have been an excellant company to short in the past.
Where is our next opportunity? Woolworth? Major move in the past year,
trending up, new management....
Best Regards |
