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Strategies & Market Trends : Value Investing

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To: Grommit who wrote (8906)	11/8/1999 12:13:00 PM
From: Grommit	Read Replies (1) of 78613

More on BL. I chatted with the IR person -- the treasurer. The company was an envelope marketeer until they developed the catalog business 4-6 years ago. They would do direct mailings and newspaper inserts. That part of the business represents 1/3 of sales and catalog part is 2/3 now. They also expanded their credit operation in 95-96 and extended credit to customers. Earnings suffered and they since strengthened the in-house credit operation. He speculated that perhaps the catalog transition and the credit problems is causing the stock to trade below BV. Maybe, but the stock has recently dropped and these "problems" are older. And the issue of transition to catalog is not an problem, in my view. He says they got into catalog business because the mailing biz was dropping. Now catalog revenue is 2/3 of total. He says credit is under control as evidenced that they could reduce the reserve last december. So it is good that they moved to catalog sales and good that they are moving to internet. They issue credit because their customers need it. The ship on credit and invoice the customer. Their customers are low-end to mid-range ecomomic level, he says. I asked how internet would reach those folks. He said a lot of customers are over 65 years old and a lot are on the net. I asked for guidance for next qtr. He would not provide any. Said that sales were strong and should be higher than a year ago. I asked if margins would be down and got an inconclusive answer. Was told that the clearing out of excess inventory is not complete and should not affect Q4. No guidance. This last qtr they signed a contract for website development. Are now on catalogcity, and you could see from my prior post. They will have their own site and may or may not remain at ccity. Expect mid-year rollout, next year. Supply. Direct overseas sources around 25-30%. Other sources manufacture over there, but their source is domestic. Sounds like quite a few supply sources and no issues here. He spent some time describing the differences between the 2 businesses -- catalog and mail. They do printing in house for mailings but catalogs are produced outside. Longer lead times for catalogs. Can experiment more with mailings. More inventory required for catalog. Etc... Hope this helps, grommit

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