Irene, the TA debate is interesting but let me offer a simple perspective on your concerns about why CLE is down on seemingly "good" news. I can't explain seemingly "irrational" behavior by some institutions. Nor can I explain why CLE is so frequently undervalued relative to some of its Generation-Y retailer peers who have far less bullet-proof balance sheets and more volatile peaks and valleys in their performance than CLE.
The point I want to make is to look at last year's CLE swoon and realize that there was really no FUNDAMENTAL reason for it. Business was good then and remains relatively good now. One could argue that last year the company had enjoyed a phenomenal run-up and so may have fallen short some kind of "whisper" expectations, though I doubt it. As in the current case, some folks were unhappy about the Chairman's stock sale last year. But while it may have contribued to a self-fulfilling "TA" argument (i.e. he "put in a ceiling" with his sale) there was no hidden fundamental problem revealed by his action. Claire's business continued to grow.
This year there is obviously some concern about flat-ish same-store sales, but most of us believe they should have troughed and are now recovering, while margins have continued to improve. The Chairman is again selling stock, though it should be noted that the amount is far lower than last year's sale. Again, that seems as much as anything to be what spooked the stock. And again, there's no proper reason for it to prejudice investors. He's well along in years and no doubt must get his financial affairs in order (or buy a house, the purported reason for the sale, if that's what he wants to do).
Could the timing of the stock sale have been better? Probably (i.e. higher up). Should the announcement of the rescinded stock buyback, almost assuredly due to the Mr. Rags acquisition, have included a reason? Darn right it should have. That to me was bungled.
But if TA turns out to have "predicted" a decline here, to me that will be less prescient and more a self-fulfilling prophecy caused by too many people chasing charts rather than undervalued investments. Those of us who actually believe we are buying part of a COMPANY rather than a purely abstract numerical game will pay the price temporarily, but I believe CLE's growth will make us winners in the end.
Good luck,
Chris |
