I agree with Marie on the takeover perspective. Her other points, I'm not so sure about. I suspect the website generates quite positive earnings as so many of these products are high margin items. The cost of site development will offset this, depending on how that is accounted for...amortization period, etc. But that is ok. I prefer to look at cashflow on a new business idea anyway. Particularly when up-front costs are involved. The company has done a good job of using "free" avenues to promote this site (press releases, CNBC, Intel website, etc.). So cost of adding new customers will not be prohibitively high like what I see with AOL, AMZN, and others.
Nobody expects February sales to be outstanding, this company never makes any real money in this quarter. No boxing day shopping, etc. I expect a big year over year increase though largely due to the website. Also, some growth in same store sales (year over year). And remember Marie, sales numbers are not growing as fast as margins for these guys, and margins, my dear, are all we ought to care about where the Bricks & Mortar are concerned.
Admittedly the auction site will reduce margins as a % (relative to other internet sales), but should be higher than the stores and growing strongly in the aggregate. And definitely better than a year ago.
The share price isn't great, largely due to the buy on rumour (Canadian spelling) sell on news mentality of internet traders. Now that the 3-D site is open, traders are selling in anticipation that positive news might not be coming for awhile. That too is OK, the large short position helps a bit. What the company needs to do now is start looking at promotional ideas that may cost money, but generate hits. Obviously a deal with Yahoo would be great. Or something with @home would directly target the kind of people that can afford to shop with SHRP although their user base is much lower.
If you heard Dicky's 'interview' yesterday, he mentioned the internet replacing the high cost catalogue, also he indicated they are getting agressive on deals with other websites; hopefully, some success is seen in this area.
Once again, I will comment that this is not a great short-term trader stock. Let those that want that type of investment bail out. There are enough pros watching this stock to provide support if it gets too low in the near term. I think it will look good a couple months out, and their father's day line should be well received. Interesting thing about internet sales is it will encourage 'early shopping' as many are unsure how long items will take in the mail. What this does is cause too good months as opposed to one great one around minor occasions such as F-Day. |
