Blair Corporation. Symbol BL. A gem of a net-net.
No one has mentioned BL yet. It's trading below Net-Net value similar to others mentioned on this thread, but I would say that it has higher quality assets. I think we can see the white's of their eyes. I am glad I did not find it earlier because I would have pulled the trigger at a higher price.
They do mail order, catalog and internet sales. Mainly inexpensive clothes and stuff. They have a couple of outlet stores and retail stores in order to dump excess inventory, they say. Earnings are down a bit this year and the explanation is not well communicated. It sounds like they expanded the number of catalogues, mailings and inventory, but sales increases did not materialize. With flat sales, margins dropped. But the company does not clearly point this out to stockholders. And earnings are not as bad as they look. They're making money!!
Profile biz.yahoo.com
Internet catalogs. catalogcity.com Very slow response - beware.
NET-NET CALCULATION:
** BL has not published a balance sheet for Q3. Income stmt for Q3 was a loss of (.08) per share. The Bal sheet data used here is June 30 from 10Q. So subtract .08 per share from these numbers for the Q3 loss.
Let's compare BL with the other netnets recently mentioned. My numbers may be off, but here's my calculation of Price/Net-Net:
MPP 88%
EBSC 79%
MAXS 90%
BL 72% i.e. trading at 72% of net net
Are the assets any good:
(1) AR $150 million (at $112 revenue/qtr = 1.34 qtrs = 120 days) Not great.
$35 million doubtful reserve 35/185 = 19% reserved
(2) Inventory $84 million (at $57 COGS/qtr = 1.5 qtrs = 132 days) Not great here either.
Summary:
$260 Current Assets
(89) Liab
-----
170 netnet (/8.25 shares) = $20.7 per share
+47 PPE (LT asset)
----
217 Net Tangible Assets = $26.42 per share
+1 intangible assets
-----
218 OE = $26.42 per share
$14.50 Stock Price
Hmmm. Let's adjust the assets. Let's take another $30 million AR reserve. That's 20% more of the net $150 AR. $170 netnet - 20 = 150 netnet assets --> $18 per share adjusted. Not bad.
Links:
Here's the 10-Q June 30
sec.gov
10K 1998
sec.gov
Earnings Release Q3
biz.yahoo.com
blair.com
Not much detail, but notice that last year had favorable .31 for insurance. From 10K
From the 10K describing the NRE adjustments taken in the year:
"Quarter ended September 30, 1998 includes non-taxable insurance proceeds of $2.8 million ($.31 per share). Quarter ended December 31, 1998 includes additional net income of $2.7 million ($.31 per share) due to reductions in the provisions for doubtful accounts and returns resulting from improved bad debt and returns experience. "
Quarterly Earnings and Sales
yahoo.marketguide.com
Comps
yahoo.marketguide.com
Here's financial history from the company
blair.com
They do not communicate exceptionally well. They do not break out NRE from recurring items. Comments and outlook and plans are nonexistant. Also, there are no analysts covering the company.
My take on EPS:
EPS was $2.49 in 1998, but .62 was due to the insurance proceeds and reduction in doubtful reserves. Let's adjust the EPS down.
1997 $1.45
1998 $2.49 less (.62) = $1.87 adjusted for insurance gain and reserve reductions.
1999 YTD is $0.79 But this includes a $1.6 million inventory pre tax write down this qtr. (.13)
So perhaps adjust 1999 by $1.07 million after tax (= $0.13 per share after tax). (I would certainly argue that inventory adjustments are a normal part of business and that we should not adjust them out of the picture. But to understand this qtr, I think we need to. Perhaps the adjustments could have occurred in an earlier qtr or perhaps they should have been recognized ongoing a bit every month???) So the Q3-99 just completed would have been .07 profit, I figure, without the inventory write-down.
For full year 1999 EPS: My guess is that we get a bit less EPS this year than last. Q4 1998 was .79. But we should subtract .31 for reserves which helped Q4-98 (as mentioned above). So .48 is the adjusted Q4-98 EPS. Perhaps .40 to .45 this year in Q4?? (I have not talked to the company yet for guidance help. I have a call in to them.) With that number for the QTR, full year 1999EPS (my guess) = .79 YTD + .13 inventory(?) + .43 Q4 = $1.35 EPS for 1999 (adjusted to remove onetime inventory hit in Q3). $1.22 including the inventory write-down.
So earnings look to some people as going from 2.49 down to 1.22. When perhaps 1.87 down to 1.35 range might be apples and apples. A 28% drop. Ouch. But still profitable. And at $14.50 / 1.35 the PE is 11, but Earnings are dropping year-to-year.
Some tidbits from the SEC documents --
(a) Cost of goods sold as a percentage of net sales increased to 51.5% in the second quarter of 1999 from 48.3% in the second quarter of 1998. Cost of goods sold has been negatively impacted by the sale of excess inventory and by increased shipping costs. Excess inventory has resulted from the Company's adjustment to a larger catalog operation and lower than expected response in the fourth quarter of 1998 and the first quarter of 1999.
(b) While customer accounts receivable have changed little, inventory levels, though greatly improved, have averaged significantly higher in 1999 than in 1998.
(c) Net sales for the first half of 1999 were 5.3% higher than net sales for the first half of 1998. Overall, response rates were approximately the same in the first six months of 1999 and 1998. Gross sales revenue generated per advertising dollar decreased 8%. The total number of orders shipped decreased while the average order size increased. The returns percentage improved in the first six months of 1999 as compared to the first six months of 1998 primarily due to a change in return policy. The Company stopped refunding shipping and handling charges on returns during the first quarter of 1998. This policy change reduces returns by approximately 10%...
(d) Merchandise inventory turnover was 2.3 at June 30, 1999, 2.4 at December 31, 1998 and 2.6 at June 30, 1998. Merchandise inventory as of June 30, 1999 decreased 28% from December 31, 1998 and increased 2% from June 30, 1998. Inventory levels have been impacted by the transition to a larger catalog operation, by the continuing effort to improve customer service, by lower than
expected response in the fourth quarter of 1998 and the first quarter of 1999 and, most recently, by increased efforts to move excess inventory.
(e) Capital expenditures for property, plant and equipment totaled $1,317,911 during the
first half of 1999 and $652,195 during the first half of 1998. Capital expenditures for 1999, 2000, and 2001 are projected to be approximately $5,000,000 a year in order to support the Company's marketing strategy. The increased capital expenditures will result primarily from developing our own
internet commerce site, from maintaining a higher inventory level and from expanding database capabilities.
(f) The Company recently declared a quarterly dividend of $.15 per share payable on September 15, 1999. It is the Company's intent to continue paying dividends
(g) The Company has, from the fourth quarter of 1996 through the third quarter of 1998, repurchased on the open market 544,739 shares of its Common Stock. In 1999, the Company has repurchased 756,220 shares (500,000 in January, 100,000 in April and 156,220 in May) of its Common Stock from the Estate of John L. Blair.
(h) Future cash needs will be financed by cash flow from operations
Help. What am I missing? Why are they trading so low? Will the internet put them out of business? Or will they participate and prosper? That's probably the issue. They have capital spending plans for internet and I bet they talk about it every day. The balance sheet could support the effort. Hopefully AMZN will leave something for Blair to sell. Maybe the story is like DLIA. Worry, worry, worry... Or maybe Blair become very successful. Maybe the stock just returns to Net Tangible Asset Value!!
I once read that you should not buy until you understand the seller. And you cannot just say "he's a dumbshit". Who's selling? According to this:
yahoo.marketguide.com
(a) Shorts are selling. Small potatoes however. Short int 10/8 21,000 shares.
(b) Institutions are selling. Net 229,000 shares in 3 mos 7/8/99 to 10/8/99
(c) Insiders are not active. Why not?
Ave daily volume 13,500 shares. There was a bit of volume last August which might have been Institutional selling. 4 days with around 480,000 total volume. (Isn't the reported volume really doubled up for one seller and one buyer?) So is that 240,000 shares bought and sold?)
So why are they selling? Other than internet risk. One might argue that since the company communicates poorly and no analysts cover the company -- that individuals might act irrationally. But institutions usually are not dumb. Is the only argument available here that this company is not widely followed buy the brightest of institutions? We need to figure this one out. Or is this the reason...
Message 11834461
Other comments:
In addition to catalogues, Wendolene thinks she has seen their flyers in the sunday paper occasionally. They share one page flyer with someone and offer discounted clothes or other merchandise.
aardman.com
I have not seen the proxy yet and I have not talked with the company yet. I searched SI for blair to see who else has found this jewel -- all I get is the Blair Witch Project. :o)
Don't forget --
stock price $14.50 +/-
net net over $20
net tangible assets over $26
PE of 11
Plans for growth
Did I mention dividends? -- $0.60 annual per share or 4% yield.
Excuse the long post -- comments and help would be appreciated.
|
