I've run the numbers again on FM and here is what I come up with. In an article in the San Diego Union on 5/9, FM states that they will open 80 new stores this year, and 110 next year. Average sales per new store is $1.2 million. Number of stores at end of 2Q97 was 895, up from 879 at the end of FY96 (Oct. 96). Read the article at: uniontrib.com
(you have to be a subscriber, but it's free)
It appears that they have not opened very many of these 80 new stores for '97 yet; only 16 so far, with 64 to go by the end of the year. That means that the bulk of sales and revenue growth will be occuring in the next 2 quarters, which are typically FM's best anyway. Each new store will add an average of $1.2 million in additional sales per year. True, they won't all have a full year of revenues, but the quarterly numbers are going to see a nice jump as we move forward. If you just do the simple math, keeping per-store growth flat and using the most recent quarterly revenues/earnings, 959 stores for '97 generates $1.15B in sales; 1,069 stores in '98 generates $1.29B in sales. That's $0.80/share in '97 and $0.90/share in '98, using a weighted average of 39.5M shares outstanding. (I've used $1.2M average sales per store over all; YTD for the first half of FY96 they're all running at an annual rate of $1.15M each, and with the 2 best quarters coming up, $1.2M each is reasonable IMO)
At $12/share, that's a PE of 15 based on '97 earnings, and 13.3 based on '98. Throw in the fact that same-store sales at Jack-in-the-Box are growing (contrary to many of its competitors), and the potential for a victory or settlement from the Vons lawsuit, and revise these conservative numbers upwards from here. This stock is still cheap, IMO.
D. Kuspa
As always, do your own research! |
