Seeking Alpha
View as an RSS Feed

Clumsy Rick, CFA  

View Clumsy Rick, CFA's Comments BY TICKER:

Latest  |  Highest rated
  • Best Buy: Muddled Message on Conference Call, But Path to Upside Is Clear [View article]
    I agree with most of Bill's response to your questions. BBY has been successful with exclusives, especially for an introductory period in categories like handsets. Also, adding exclusive content for DVDs and other packaged media. I think they are looking to grow this (i.e., special content for games like GME does) but its easier in some areas than others. This one way BBY can continue to compete, but not the only answer.

    On the private label, again, they are always looking to expand where they can. This is an old strategy, but one that continues to gain momentum as it takes time to build brands.

    On the major increase of online SKUs BBY is making, I think it will be largely third party branded products, especially the ones selling well on Amazon and other places it currently doesn't carry. BBY already sells most private label SKUs online. The idea is to go head to head, SKU-by-SKU, on pricing with Amazon and others. If a consumer does a price search online for a TV, BBY wants to come up competitively for virtually all important TV models. Also, its SKUs they won't be carrying in BBY stores. That way BBY can price very aggressively, without the store overhead factored in, and not worrying about cannibalizing in-store sales. Finally, the expansion of online SKUs is going to be, to a large extent, working capital free, with most new SKUs shipping directly from manufacturers or third parties.

    I think many analysts have ignored or overlooked how big a deal this online expansion will be. BBY will be capturing sales from a very different, tech savvy but hyper price conscientious consumer that they are missing today. It should be a decent margin as the overhead is low. Companies in other retail channels have done this quite successfully the last two years. I think Internet could grow to 10% of sales from its current 5% over the next two years, adding $2.7 BN in revenue and $0.40-$0.50 to earnings.
    Mar 26, 2011. 09:18 AM | 4 Likes Like |Link to Comment
  • Genuine Parts: Earnings Will Again Top Expectations [View article]
    Autoparts division running at 7.5% OM for 2010. It was doing 10.5%-11% in the late 90's but realistically the company is hoping to get it back to 8.0%-8.5%. That's not a new target, but never quite sure why they couldn't take it higher given competitors all operate in the teens. They don't provide sq ft (or even an exact store count), but assuming the average corporate store size is about 6,000-7,000 sq ft, the corporate stores are doing about $220-$255 sq/ft, or about in line with AAP at $235 and AZO at $250. The independents, however, sell significantly less- I'd say more like $125-$150 sq/ft. The industrial and electrical divisions are their growth divisions. The industry is very unconsolidated and so they can grow revenues an additional 5% or so through rolling up smaller stores at cheap prices. Not sure what the ROI hurdle is on these deals (+20% seems the industry standard), but they have been very selective, even through the recession. The office supplies business is a cash cow, with 8% OM and the potential to approach 10% again with very little capex. I don't think they have any desire to sell divisions, but if they did this would be the one I would guess they would part with. They are content to maximize their opportunities in what they know and focus on growing the dividend, which they raised 10% this year and, based on my forecast, should grow another 10% at the end of 2011
    Mar 18, 2011. 08:41 AM | 2 Likes Like |Link to Comment
  • Genuine Parts: Earnings Will Again Top Expectations [View article]
    Thanks for your comment. A generally look at multiple valuation techniques, including DDM where applicable, DCF and forward P/Es. On these metrics, GPC looks attractive, especially if you are using earnings that are above the consensus forecast in your valuation as I am. Looking at the TTM P/E seems to me like looking in the rear view mirror only. Useful, but i doesn't tell you where you are going.
    Mar 17, 2011. 11:03 AM | 1 Like Like |Link to Comment
  • RadioShack: CEO Jumps Ship, EPS Below Expectations - Why These Are Not Reasons to Sell [View article]
    I would say financial results will see strong acceleration in 6 months, but, no, I think the stock will move long before that. The stock is very cheap and should attract value investors now given the big 4Q risk is now behind it.
    Jan 24, 2011. 03:41 PM | Likes Like |Link to Comment
  • Return of the Retail Roll-Up [View article]
    I agree it looks cheap on EV/Sales too. Seems to me it has stumbled more than "a bit" on margins though, driven by bad product. The risk as I see it is that it CWTR continues to have difficulty with its product this year and they end up like a PSUN, where the future of the company is in question. They payoff if they fix the product is, as you'e pointed out, very high. But I think the point I was trying to make in this article is simply that there are many retail companies, most with no real issues with their business, that are very cheap by historical standards and when measured against buyouts this year. This is a great environment for retail consolidation.
    Jan 20, 2011. 08:00 AM | Likes Like |Link to Comment
  • Return of the Retail Roll-Up [View article]
    Free People is an amazing brand. CEO said they got the shoes and accessory business right this holiday season, which is why it did a +30% comp, but I think the whole brand is on trend and hot. While it should do very well, its still under 10% of sales. So if you are trading this stock (short term view), I would focus more on how Urban and Anthropologie are doing. Results there were just "ok" for holidays (flatish, ex-com), which is about average from what I have seen.

    I'm interested in going long myself at some pt as the brands are strong with huge growth potential (incl international) and I think mgt is exceptional. Visionary might be a bit much, but mgt clearly see consumers and the retail world in a clear way. I can see them adding more great brands, either organically or thru acquisitions. What keeps me on the sidelines right now is valuation. While I like the company, there are many other retail stocks with excellent earnings growth prospects for a recovering economy that I can get at half the price (i.e., BBY)
    Jan 13, 2011. 06:39 PM | Likes Like |Link to Comment
  • Rex American Resources: Even Its Subsidiaries Are Buying Back Stock [View article]
    Whether or not E15 is approved for older vehicles, i think the difficulty this year will be getting stations to sell it given concerns about consumer confusion at the pump and voiding auto warranties. The tax credit seems doomed eventually, I agree, although if the economy is in better shape, perhaps something will go through next year (perhaps a credit at a lower rate). I think the industry is after a solution that ties these issues together. Allow the tax credit to phase out at the end of the year, but get some industry-friendly regulation and funding in place to ensure consumers can get E15. If done the right way (i.e, new subsidized dial pumps for stations), it could successfully expand E15/E85 consumption for years to come. It would also be more palatable for Congress given its an end to ongoing subsidies, stimulates more capital investment (read: job growth) and makes next generation biofuels more attractive investments (thus ensuring more investment and likelihood of success) by expanding the market and establishing infrastructure.

    However, this is not reality yet. The industry looks difficult near term, particularly given spreads have come down so much since Nov.

    Rex, though, should get a boost next year from its most recent acquisition (NuGen LLC). Also, it has one plant (Levelland) that continues to loose modest amounts of money. Closing it would be accretive, I think, excluding a non-cash one-time charge to write down the assets and debt. The other plants are very profitable. Even without Levelland, at $15/share for REX you are only paying $2/share for the ethanol assets (after subtracting out corp cash, real estate and tax credits) that are worth $7.50/share even in liquidation (based on previous liquidations) and obviously more under regular sale conditions.
    Jan 13, 2011. 04:51 PM | Likes Like |Link to Comment
  • Short Opportunity: Same-Store Sales Surge on Market's Oversight of Anomaly [View article]
    While Super Saturday shifted, what do you think about shoppers being off on Christmas Eve this year because of Christmas falls on a Friday? Won't we see significantly stronger sales Friday (or, for comparison purposes, the day before Christmas this year versus last year)? I ask as it seems that a significant number of shoppers may have decided to use Friday to do a large part of the their final shopping instead of Super Saturday this year (I certainly am), since they will be off anyway and because, we all know, shoppers are waiting until the last minute to shop in hopes of getting better deals. If this is true, Super Saturday this year is actually less of a seasonal impact this year versus last. This doesn't quantify it or refute your claim which is still valid, but it could mean that this week won't be so bad after all.
    Dec 23, 2010. 09:57 AM | 1 Like Like |Link to Comment
  • Best Buy: Unduly Punished by Short-Term Factors [View article]
    Good point, especially as other times I have been in there you can never find help. They could clearly benefit from better labor management systems that other retailers have been setting up over the last few years.
    Dec 16, 2010. 05:59 AM | Likes Like |Link to Comment
  • Bad News for Best Buy Is Good News for RadioShack and Gamestop [View article]
    thanks for the comment. I certainly didnt want to imply that what's bad for bby has to be good for RSH and GME. Clearly, weaker industry sales would hurt everyone. I'm simply saying that some of BBY's issues are BBY's alone. For RSH, the fact that WMT and AMZN gained lots market share in TV would have almost no impact on RSH sales since RSH sells so few. Strong iPad sales, however, likely had a more negative impact. More importantly though, BBY said wireless was quite strong. This is affirmation that smart handset sales continued to grow at a strong pace in 3Q, which is critical for RSH growth since it makes up almost half its revenue in 4Q and more than +100% of its expected revenue growth
    Dec 15, 2010. 09:24 PM | Likes Like |Link to Comment
  • Why It's Time to Buy Best Buy [View article]
    I agree that its a "Buy" but curious why its only close to being a value stock when its trading at 4.25x EBITDA. Retailers have been getting bought out at 7x-9x this year and Best Buy's brand is far stronger than theirs. Stock is trading just below the midpoint of that range on arguably depressed EBITDA. In other words, someone with big pockets could offer to buy BBY at a 50% premium multiple from here and still make out like a bandit vs. other deals done this year.
    Dec 15, 2010. 02:37 PM | Likes Like |Link to Comment
  • REX 2Q Preview: Tough Qtr. Looks Like Bottom [View instapost]
    As a follow up to the actual report, GAAP earnings were $0.12 for 2Q. However, excluding non-cash real estate charge of $400k and a non-cash derivative charge of $1.878 mm and using a more normalized tax rate (33.5% vs. 60.5% reported), EPS were exactly $0.25. While none of the adjustments are one-time in nature, they are unusual and can swing either way (for or against the company) in any given quarter and is useful to exclude them to understand how the core operations did. In this case, core operations did exactly as predicted. I also stand by my forecast for 3Q where earnings should be closer to $0.50-$0.60.
    Sep 14, 2010. 07:48 AM | Likes Like |Link to Comment
  • Revisiting Rex: Recent Sell-Off Creates Compelling Asset Play [View article]
    I agree 100% micro. Take it private or explore selling the company to ADM or others for $24-$26/share. Beyond the expenses of being public, why risk any capital buying more plants or any other assets when your own stock is so undervalued and is the best investment you could make with your cash? However, this has been true for years and nothing has happened yet. Perhaps when Stuart, Doug, Zafar and the other execs think about retiring....
    Aug 16, 2010. 10:27 AM | Likes Like |Link to Comment
  • Revisiting Rex: Recent Sell-Off Creates Compelling Asset Play [View article]
    Sorry. Rex changed its ticker from RSC to REX when it changed its name a few months ago. I am long REX.
    Aug 15, 2010. 09:07 PM | Likes Like |Link to Comment
  • Revisiting Rex: Recent Sell-Off Creates Compelling Asset Play [View article]
    All but $2 million in debt (which is mortgage debt, offset by restricted cash in my calculation) belongs to the two LLC's that are consolidated on Rex's balance sheet. The rest is is all non-recourse to Rex and is excluded just as you exclude the cash that belongs to the LLCs that is also on Rex's balance sheet. Its all accounted for in the enterprise value per gallon calculation when you are valuing the ethanol assets.
    Aug 15, 2010. 09:03 PM | Likes Like |Link to Comment