Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Non-Tech : RAINFOREST CAFE -- Ignore unavailable to you. Want to Upgrade?

To: Rusti H who wrote (3794)	1/9/1998 5:58:00 PM
From: J. Kittle	Read Replies (1) \| Respond to of 4704

Rusti: If you want to keep track, I'll start the countoff. I'm Shareholder #1. Jeff PS: Dennis, I know you can crunch the numbers, got any restuarant management or retail experience? Regardless, you got my vote.

To: Rusti H who wrote (3794)	1/12/1998 12:52:00 AM
From: Dennis Vail	Respond to of 4704

Hi Moe, Before getting into the nuts and bolts of the plan to run someone for RAINs board of Directors, I'd like to post something on the most misinterpreted fundamental issue. So her'sere's my reasoning for why the drop in Same Store Sales(SSS) is misleading: First to say the SSS at the three oldest units (MOA, Woodfield, Gurnee) were down 11% is an essentially meaningless statement. MOA was up 3% which means Gurnee and Woodfield were down an average of around 16-18%. Since Woodfield has been open the longest I'll focus ( and I believe most analysts do also) on that Unit's numbers as being most significant. Here's the flow of SSS at Woodfield based on memory: 4Q '96 -14%, 1Q '97 -12%, 2Q '97 -10%, 3Q '97 -3.5% and 4Q '97 -16% to-18%( (Unfortunately RAIN does not release Unit by Unit quarterly revenues to individual investors anymore. Paine Webber and Thalmann reports suggest they give more detailed information to analysts. Both unfair and unwise in my opinion.) Obviously the 3Q '97 and 4Q '97 are out of whack. A more reasonable flow would have 3Q '97 -7.5 (Edible's original prediction BTW) and 4Q '97 -5%. So what occurred to cause these quarters SSS to be skewed, 3Q 4% to the postive and 4Q over 10% to the negative? Here's some possibilities: In 3Q '96 Gurnee had just opened and drew some regular Woodfield customers and thus revenues off for curiousity visits in the excitement of the new opening. Say 4% (7.5 minus 3.5%) For the most part this would be a one-time effect that would diminish over time but may still be sucking off 1-3% of revenues that Woodfield would be attracting if Gurnee wasn't there. So the Gurnee opening could initailly (3Q '97) have sucked up 5-6% of Woodfield revenues but it was probably down to to 1-2% by #Q '97. The fact is both the Units are right off connected expressways and are perhaps 25 minutes apart during normal traffic. (Of course other factors are at work like beanie baby sales but in my opinion BB sales were just starting to crank up in Chicago 3Q 1996 (Chicago is where Beanie Babies Ty Inc is from) and began tailing off in 3Q 1997 such that the corresponding revs are more or less equal. IMHO BB sales will continue to be strong as they are very cool at least in the esteemed opinions of my son and daughter. But they are no longer #1 on kiddies lists for stocking stuffers. Cyberpets would have replaced them at least in the hearts and minds of my middle school students. Now 4Q 1996, that was beginning of peak beanie baby craze time BTW. That Xmas beyond doubt Beanie Babies were the stocking stuffers of choice and RAIN was a major outlet particularly when others were sold out. So how much is that worth percentagewise. Well, Woodfield was off 14% in 4Q 1996 SSS. Tyson's Corner is off about 21% in 4Q 1997 SSS. I propose because of the strength of Beanie Babies in 4Q 1996 Woodfield's 1996 numbers were 3.5% better than they would be without Beanie Babies that quarter while Tyson's are off 3.5% more because of the reduction in Beanie Baby demand since then. Basically thats about 15,000 bbs a quarter although a percent of people that came in to an RFC just to buy beanie babies ended up buying other stuff there as well. At any rate that also gives 17-18% as my guess for the drop in SSS traditional mall units will undergo. No big deal in my book as long as the trend begins turning around the second year which it did in MOA and was doing at Woodfield before this Q. Of course the opening of the River North RFC in downtown Chicago at the beginning of 4Q is the biggest cause of SSS drop at Woodfield this Q. Once again the River North RFC is only a few blocks off the expressway that goes directly to Woodfield and in non rush hour traffic its a 20 minute drive from one to the other. The area around the expressway between the two units is rather densely populated by professional families. For this initial quarter I think it quite likely that up to 8-10% of Woodfield potential revenues were sucked up by the downtown Icon Units opening. I would think this will diminish to 2-4% by next year. (Since River North opened I've gone there 3 times, to Woodfield once and to Gurnee not at all.) The fact is River North is easier to get too and I can have alot more fun with the kids in the nearby Navy Pier area. (IMAX 3D and Kohl's Childrens Museum,etc). However if I needed to do shopping I'd still hit Woodfield (or Gurnee) Two other drags on this Q's revenues at Woodfield would be the lack of cold weather this fall and winter. If fast music can make people eat faster, cold weather can make people buy sweatshirts faster and a good portion of Woodfield retail is sweatsuits,etc. Finally the Bass Pro Shop that opened in mid Novemeber at Gurnee Mills is a major draw for families. I'm sure it's attracting some peoiple to Gurnee over Woodfield. I had thought it would help the RFC at Gurnee but apparently so far its only overshadowing it. I still think in the longrun it will help.I hope to get up there myself soon to investigate. In conclusion I see Woodfield having lost 3.5% of revs from the decrease in BB sales and say 9% from the excitement of River North opening. Adjusting the estimated 16-18% drop in Woodfield revs this Q for these factors leaves us off about 5%. Which is highly acceptable. Keep in mind that RAIN hasn't yet become a fad, that there are still plenty of moneyed folk in the Chicagoland area that have never heard of RAIN and that down the line the name recognition fact that the downtown unit is producing will end up increasing all three Chicago units revs. RAINs problem is a credibility problem not a fundamental one. IMHO RAIN needs to stop acting like individual investors are fools. Give us the bad news as well as the good straight out without spin. We can handle it. Whatever market capitalization is lost on the short-term drop will be more than made up for by the longterm trust thats created. So give well organized Unit by Unit numbers to give all investors, or at the least give the same info and on as timely a basis to all investors as to professionals. Also RAIN needs to stop acting like its scalping its own stock (buying when its undervalued and selling when its overvalued). Right now I'd have to say an announced offering by RAIN must be treated as a very strong sell signal. Finally get the best man/women available to run RAIN's expansion and give him/her true control of the show. As has been mentioned Carey has done an outstanding job this year and should oversee day to day operations as COO or whatever but RAIN needs someone to be The Man (or the Woman) that comes from outside. And of course RAIN needs a Board of Directors with lots of experience in the industry that ALL INVESTORS can trust. Regards, Dennis