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Strategies & Market Trends : Roger's 1998 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: Market Tracker who wrote (13951)	9/23/1998 10:37:00 PM
From: Market Tracker	Respond to of 18691

SWK follow-up SWK (Stanley Works) resumed trading this morning following the issuance of an earnings warning. It appears that the systemic problems within SWK may take some time to overcome. I shorted SWK yesterday morning at 36 5/8, and believe that 22-24 price range within reason. biz.yahoo.com The New Britain, Connecticut-based company said it expected nominal sales growth and "quarterly core earnings at levels similar to those actually achieved in the respective prior year quarter" until mid-1999. "Essentially, the problem is that we have an overabundance of stock-keeping units (products and their variations) in the company," said Vance Meyer, Stanley Works spokesman. He told Reuters this was a deep systemic problem which was not new. The company said it was pursuing "a dramatic, product-pruning program to remove low-selling items while focusing production on high-volume offerings." Wall Street analysts had been expecting third-quarter earnings of 62 cents per share versus 54 cents a year ago, according to First Call estimates. Stanley Works has seen its share price decline sharply in the last few months, and it also warned three months ago of an earnings shortfall for the second quarter. The company is in the midst of a major restructuring announced in July 1997, shortly after the arrival of John Trani, a former General Electric Co. (NYSE:GE - news) top executive, as chairman and chief executive officer. This includes trimming 4,500 of its 19,000 worldwide jobs by mid-1999. The company has now closed 20 plants out of a scheduled 53 it plans to shut down by mid-1999, Meyer said. "They've got some systemic problems, and they've finally owned up that it's going to take quite a while to change them," Horan said. "The main problem is order execution -- getting an order from a customer, and filling it." Horan said Stanley Works is bolstered by its strong brand name. "If they didn't have that strong brand name, the results would be a lot worse. Because with the order-fill rate problem they've got, people just wouldn't stock their product." MT