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Background

Lifetime Brands (NASDAQ:LCUT) is in the housewares industry. Its brands, which it owns or licenses, include Farberware, KitchenAid, Mikasa, Pfaltzgraff, Kamenstein, Cuisinart, and Elements. It primarily sells its products to retailers and distributors, though it does sell direct to consumers through its websites. Lifetime Brands sources its products from suppliers located in Asia, Europe, and the United States. Lifetime Brands was founded in 1945 and is headquartered in Garden City, New York.

Good Time to Buy?

Lifetime Brands has a P/E ratio of 8.97. It currently has the lowest P/E of the Housewares industry. It also has the lowest P/S and P/B of the industry at 0.36 and 0.98 respectively. Its debt-to-equity ratio of 0.42 is relatively low for the industry. Insider ownership is 9.7%, which is one of the higher insider ownerships for the industry.

Two initiatives will help drive performance for 2013 and beyond. Lifetime Mix is a strategic initiative designed to refocus efforts in areas such as product design, branding, inventory, inventory management, and customer service, in order to ensure short and long-term goals are met. Lifetime QM is a tablet based QA system that will help improve the quality of products and packaging.

Net sales for Q1 2013 are 9.9% less than Q1 2012. At first look, that is bad. However, Q1 2012 was exceptionally strong due to promotions and new product rollouts. Lifetime Brands expects 2013 to be strong overall, with performance for the second half of the year compensating for the first half.

The company expects net sales to increase 4-6% in 2013, with growth primarily occurring in Q3 and Q4.

A $10 million stock repurchase was recently authorized by the Board of Directors. The program may be modified, extended, or terminated at any time.

In December of 2012, Lifetime Brands acquired Fred & Friends. Fred & Friends accounted for $3.4 million of net sales for Q1 2013. Overall, Lifetime Brands had net sales of $98.7 million for Q1 2013.

Dividends

A quarterly cash dividend of $0.03125 per share was announced. It is payable on August 15, 2013 to shareholders as of August 1, 2013.

Management

On June 17, 2013, Lifetime Brands announced the appointment of Daniel T. Siegel as President of the company. Siegel joined the company in 1992 and has held positions including Senior Vice President - Sales and Executive Vice President.

The CEO, Jeffrey Siegel, is also Chairman of the Board of Directors and President. He has been a director of the company since 1967.

Risks

Wal-Mart Stores, Inc. (which includes Sam's Club and Asda Superstore) accounted for 16%, 15%, and 15% of Liftime Brands' net sales in FY 2012, 2011, and 2010 respectively. Lifetime Brands is therefore largely dependent on Wal-Mart. While Wal-Mart is a large, stable company, a performance or financial hit could adversely affect Lifetime Brands.

If interest rates increase it could adversely affect Lifetime Brands profitability, since the company borrowings have floating interest rates.

The company competes with other companies that are larger and have greater consumer recognition.

Since Lifetime Brands' Asia vendors are primarily located within China, the company is exposed to the risk of regulatory, political, and economic changes within China. Changes in currency exchange rates also might have a negative affect on profitability.

Lifetime Brands depends on trade names, trademarks, and patents that it licenses from third-parties. The loss of a license or an increase in the royalty rates could adversely affect the company's margins.

Conclusion

Lifetime Brands appears to be undervalued. Its low price and debt make it an attractive investment. Insider ownership along with the stock repurchase indicate that management believes in the long-term potential of the company. The company has plans that will help growth.

Source: Lifetime Brands: A Good Housewares Stock At A Good Value