Brian,
Yes, number 1 is a guess. Ordinarily I would share your conviction that the CFO saw numbers he didn't like. In this case I only have a small concern that he saw something terrible. This is because OO's financials still look to be in reasonable shape (even though their revenues are trailing off badly!). There doesn't seem to be the seeds of stink in them (high debt, extremely bloated inventories, collections issues, etc.) On the other hand, it is clear that Jennard is an autocrat (e.g., his last minute redo of the M-frames which delayed their release beyond the Christmas selling season). I simply think it's much more plausible that Jennard is a total pain in the ass to work FOR (especially if you are expecting to work WITH him) than other explanations for the CFO resignation.
Re number 2. The fact that OO got hammered during a bull market is irrelevant. It deserved to get hammered. Yes the overall market (compared to historical norms) is priced on the high side. So what? If the market as a whole corrects, it will carry all boats lower. If we were in a bad market, OO would have been hammered more. It would not still be trading at 20 times projected earnings.
Re number 3. OO can only sell product if they have product to sell. I'm assuming OO has a fairly good sense looking forward one quarter, and advised analysts to lower estimates accordingly. I do not think that anyone has as good a feel (in the sunglass market) looking forward two quarters (part of the risk). I think analysts are more on their own here, and OO has every reason to lower analyst expectations (like the politicians in the early primaries do to reporters -- it's all about perception and expectations, not actually who wins the primary). Assuming consumer product acceptance of X-metals, Fives and polarized lenses, OO will be able to produce and sell much more in July and August (for the third quarter), then they can in May and June (the ramp up) (for second quarter). So, if second quarter results are fairly accurate at .14 cents, and if Sunglass Hut finally has inventories in line during the second quarter (this seems expected) and IF (the big if) OO's products are hot, the third quarter should exceed .16 cents. Clearly at .16 cents, analysts are not assuming hot product.
Re number 4. Yes the info is from OO. I trust its accuracy because it was directly and openly given -- no room for "plausible deniability." (As I am sure you will recall, many months ago I wrote you an e-mail regarding my strong concerns with OO's veracity. The X-Metal shipments (hey, we said we shipped, we didn't say how many), is a very public example of an indirect lie by omission -- they think they are being clever spin doctors)
Re other posts that offer glowing opinions regarding OO's stock price, but do not offer a rationale. We all prefer posts that are reasoned.
There is reason to think that OO is in for gloomy times (I am nervous, but less so than I was a couple of months ago). On the other hand, there is also reason to think that the stock will rise dramatically before late October. There are lots of OO momentum players. Take for example the run up from 9 to 12 after RAYS announced better than expected March same store comp results and before OO announced devastating 1st quarter numbers a week later. You were right to sell before the backlash. But even got caught up in the expectation that OO's Q1 numbers would be good and send this stock soaring.
If all the ifs (of number 3 above) occur, when OO does post better than expected third quarter numbers, the run up will be quite nice. And, as a bonus for anyone who sticks around after that, the comps after October (coming off a bad year) will be easier for RAYS and OO to beat. |
