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Bridgford Foods (NASDAQ:BRID) is expected to report fourth quarter results on January 27th, when it files its "form 8-K" with the SEC. The company's expectations have been ratcheted down significantly due to the current dismal economic climate, and the share price probably reflects the market's dire outlook on the company and then some.

10% sales decline: Look for BRID to report revenues of about $34.4 million, down 10% from last year's fourth quarter of $38.2 million. The snack food purveyor should post a net loss of 10 cents per share versus breakeven results generated the prior year. BRID's gross profit margin could decrease as much as 200 basis points from 35.7% to 33.70%, due to lower overall sales and stubbornly high input costs. The company's SG&A cost could expand 100 basis points from 33.5% to 34.5% due to higher payroll costs.

Relief coming: BRID's first quarter should see some improvement. Plummeting fuel and commodity prices (which came too late to save the fourth quarter) could add 200-500 basis points to its gross profit margin, possibly propelling first quarter earnings as high as 25 cents. If you annualize the potential 25 cents of earnings, you end up with a very low multiple of only four times 2009 earnings.

Too many eggs in one basket: Diversifying is key and something I failed miserably to do with BRID. I am paying the price big time for this error. I should know better. I admit, I bought way too many shares on the way down. The stock hardly trades, so it is very difficult to sell or buy without running the price significantly in either direction. There is simply no liquidity. I feel like I am "stuck" in the position, and have the feeling I may have to wait for the "cows to come home" before the company gets whole again. In the future, I must adhere more closely to an old oil tycoon's words . His saying, "money is like manure, If you spread around, it does a lot of good, but if you pile it all up in one place, it starts to smell like hell." It makes perfect sense to me, but easier said than done.

Bottom line: The share price has been decimated beyond reason and probably has no where to go but up at this stage as operational improvement could be right around the corner. Management might also evaluate the feasibility of taking the company private in order to reduce the accounting costs associated with remaining in compliance with the Sarbanes Oxley Act. Management holds over 80% of the 9.4 million shares outstanding, so purchasing the remaining 1.6 million shares would not be a major financial undertaking. If the company were to go private, it could expect to save as much as $2 million a year on accounting labor. Either way, shareholders should expect the share price to ultimately improve.

Disclosure: Author holds a long position in BRID

Source: Bridgford Foods: Expecting Dismal 4Q, But Relief Is Coming