iionline.com
Analyst: Adam Lowensteiner (5/14/99)
Vermont Teddy Bear (NASDAQ: BEAR Quotes,
News, Boards):
Don't be scared of this company because of its ticker.
CEO Liz Robert, who was the company's CFO before
taking the reins in October of 1997, is tight-lipped about
making predictions, but appears very bullish about future
operations.
Aside from the awesome financial highlights in the third
quarter, the company's press release mentioned that it
showed a 44% increase in Bear-Grams the week prior to
Mother's Day over last year.
Revenue climbed 26% to $7.3 million. Margins expanded
immensely, with the gross margin at 63.8%, from last
year's 56.5%. The improvement mainly came from the
company's removal of its off-site stores, which carried lots
of inventory for resale, which carried margins of 50%.
Although selling expenses increased by a bit more than
$100,000, as a ratio to revenue it was 34%, down from
40.8% last year. This too was due to the closing of
off-site stores and the company's leverage of its website.
Vtbear.com brought in 25% of the revenue in the quarter,
up from 7% last year. The site has helped the company
market its products. 'It's a supplement tool,' says Robert,
'we drive our own market.' By driving people to the
website, which is marketed in radio commercials, the
website has alleviated the amount of calls the company's
call systems receives, which in the long-run saves money
for the company.
'It's really a miracle,' says Robert about the business
before the Internet. As an average order is about $85, the
Internet now allows bear shoppers to see the product
before ordering it. Prior to the Net, Vermont Teddy
Bear's call system was flooded with calls, as customers
had no clue as to what they were really ordering. Another
important fact about the website, is that 90% of the
people coming to vtbear.com know the address prior to
logging on to the web, meaning that the company is
essentially driving its own traffic.
Robert is not yet comfortable giving out projections, but
she did say that one of the company's goals, aside from
profitable growth, is to expand new markets. Presently,
Valentine's Day produces 20% of the company's annual
volume, and Mother's Day and Christmas each contribute
10%. So three holidays of the year command 40% of
Vermont Teddy Bear's volume.
Robert would definitely like to mix things up, but said 'We
are being very cautious with new markets.' Robert
mentioned secondary type holidays, like Nurse's week,
Halloween, and Secretary's Day as examples of markets
her company could fill.
Vermont Teddy Bear looks to be on the right track, and
should easily earn $0.25 a share in fiscal 1999, ending
June. This estimate could even be low, as the margins
have improved over last year. Using a multiple of 20 times
$0.25 a share, the stock would be valued at $5 a share,
which would still be below its 52-week high of $5.31. The
stock unfortunately traded as low as $0.31 a share last
October, when the market plunged, but has decent
volume for a microcap stock, averaging over 60,000
shares a day.
In addition, in March, Vermont Teddy Bear signed a deal
with Yahoo! (NASDAQ: YHOO - Quotes, News,
Boards), that puts its teddy bears for sale on Yahoo!'s
shopping area.
Again, don't let the 'BEAR' ticker scare you. Embrace it.
Give the stock a fat hug. |
