Conrad Schickedanz

Value, growth, long-term horizon, medium-term horizon
Conrad Schickedanz
Value, growth, long-term horizon, medium-term horizon
Contributor since: 2012
"Pacsun has been losing money for years now and sales growth just turned negative again in the two most recent quarters forcing the company to issue preferred shares on top of the current $100 million in debt."
This statement implies that PacSun recently issued preferred stock as a result of two quarters of same store sales declines. PacSun has not issued any preferred stock since 2011, according to its most recent 10-K.
For bebe you have calculated a liquidation value of close to $100 million based on cash/securities and real estate assets. Have you considered the $213 million in outstanding lease obligations referred to in Bebe's recent 10-K?
"After reporting an unexpected loss in the recent quarter, and cutting its estimates for next quarter..."
Actually, the company reported a non-GAAP profit for the most recently reported second quarter. Also, the company issued third quarter guidance for the first time in its 2Q earnings release, so it can't be said to have cut its estimates, unless you have some filing indicating otherwise.
http://bit.ly/1c1Cr1B;highlight=
Thanks for your reply.
From the conference call transcript of March 13, 2012, Michael Kaplan had this to say, according to the Seeking Alpha Transcript.
"Now let me transition in discussing an additional non-GAAP adjustment that was reflected beginning in fourth quarter 2011. In connection with the company's $60 million senior secured term loan financing with the affiliate of Golden Gate Capital, the company has recorded a derivative liability equal to approximately $15 million, which represents the fair value of the Series B Convertible Preferred Stock upon issuance. The company's stock price on each respective valuation date will be a key input when determining the fair value of this -- of the derivative and will tend to fluctuate based on movement in the fair market value of the company's underlying stock.
In accordance with applicable U.S. GAAP, the company has marked this derivative liability to market through earnings and will continue to do this on a quarterly basis until the Series B Preferred shares are either converted into PacSun common shares or until these conversion rights expire in December, 2021."
Link to transcript: http://seekingalpha.co...
Details of the preferred stock conversion process can be found in section 3.4 of the 8K/A filed Decemeber 8, 2011, which can be found below:
http://bit.ly/15veyLS
The filing includes the following statements:
"Simultaneously with the conversion of all or any portion of the Series B Preferred, payment in full of the Conversion Price shall be delivered to the Corporation. Such payment shall be made (at the option of the holder of such Series B Preferred) (i) in cash, by bank wire transfer in immediately available funds, or (ii) if at the time of such conversion, the per share Fair Market Value of the Common Stock is greater than the Conversion Price, by surrendering a number of shares of Series B Preferred (or fractional portions thereof) having a value, determined as provided in this Section 6(a), equal to the aggregate Conversion Price to be paid at the time of conversion (a “Cashless Conversion”)."
In your reply, did you consider that the company said it "recorded" a derivative liability which "represents the fair value" of the preferred stock upon issuance, and that the company said it is marking the derivative liability to market as quoted above? Did you consider that the filing quoted indicates that the Corporation is to receive "payment" on a conversion? Do you maintain your original conclusion in your reply?
Of course, I urge everyone to do their own due diligence, including confirming whether any of the above quotes were amended in subsequent filings or information released by the company.
You might want to double check the store count you refer to twice. The company's most recent earnings report indicates it ended the quarter with 637 stores, not 800.
Also, why are you focusing on GAAP earnings and the derivative liability? Michael Kaplan also said this during the conference call, according to the Seeking Alpha transcript:
"Included in the loss from continuing operations for the second quarter of 2013 was a non-cash loss of $21 million or $0.31 per diluted share related to our derivative liability..."
If it is a non-cash loss, why do you think it would matter to investors?
I find your use of Google search interest an interesting method of attempting to gain insight.
However, I note your article does not mention the Google search interest for the keyword "PacSun." I just looked for the search interest myself on Google Trends for that term, and it is currently at the multi-year highest score of 100. Of course, I urge anyone reading this to verify Google Search Interest themselves to see whether they get the same results.
Thank you for clarifying your position. I have just a few quick points in response:
Last quarter, PacSun's same store sales increased 1%.
http://bit.ly/LtRE9u;highlight=
From the same section describing the term loan that I quoted in my comment above, the company stated the following about the term loan: "Annual cash interest for fiscal 2012 is expected to be approximately $3 million."
One definition of "brink" I have found online is "the point at which something is likely to begin." I do not see how your article points out that any sort of bankruptcy is imminent for PacSun, but you have elaborated on your interpretation of the words "brink of bankruptcy" so I will just say it will be interesting to see what happens when they report earnings and provide any new guidance.
http://bit.ly/LtRE9y
"Its [PacSun's] debt burden is $74.18 million...This company is on the brink of bankruptcy."
Did you conduct any research on recent sales trends before making this statement? Perhaps you may want to look at the last conference call transcript for that kind of information.
Also, did you check when any of the debt you mention is due? Perhaps you should look at the 10-K which states on page F-14:
"On December 7, 2011, the Company obtained a five-year, $60 million senior secured term loan (the “Term Loan”), funded by an affiliate of Golden Gate Capital....The principal balance and any unpaid interest related to the Term Loan is due on December 7, 2016. The Company is not subject to any financial covenant restrictions under the Term Loan."
http://bit.ly/N2Q5iY
Perhaps before writing that a company is on "the brink of bankruptcy", you may want to explain why you believe that to be so given recent sales trends, when the debt is due, and other facts that may support your thesis.
Thanks, you can see the articles related to the Chinese carriers' subsidies by clicking on the hyperlinks from the passage you quoted in the article. (Click on the blue words "China's second" and "third largest carriers" in the original article.)
"Girls at Pac Sun have left the store that was one of the reasons for the big lack of sales in the last 4 years it Continues!"
The investment community will find out whether the trend is continuing when PacSun reports earnings next week, if the company provides a breakdown by gender. Until then, I'll just mention that the most recent women's apparel photo on PacSun's Facebook page, a pair of PacSun's Bullhead jean shorts received over 8,000 "likes" since it was posted about 13 hours ago, according to Facebook (see link below). I'll reiterate, whether "liking" an item translates into actual sales remains to be seen.
http://on.fb.me/IQQBVu
I don't disagree with your comments over trends over the past four years. However, the point of part of this article was to look at potential clues of what current and future trends may be.
On the March 13, 2012 conference call, the company did acknowledge that its "[w]omen's business has started slower than we would like as we begin the year." The call also acknowledged for the fourth quarter reported men's same store sales were up 1% and women's were down 1%.
http://bit.ly/K1QXaz
That said, if you look at the Alexa numbers, and click on "audience", and the question mark next to audience, it currently indicates that according to the estimation process used by Alexa, relative to the general internet population, females are "greatly" over-represented at pacsun.com.
http://bit.ly/Jetr9l
If you look at the company's Facebook page, the last female outfit posted has almost 1,000 "likes" at this time:
http://on.fb.me/Jetsdv
Whether these women are just browsing or buying, of course, remains to be seen.
Thanks for the reply. While certainly in this type of business, there is a subjective element in determining potential success, numbers do matter, including input costs. Zumiez may sell skateboards, but Facebook is apparently telling us the most popular age group who "likes" Zumiez on Facebook is 13-17 years old, whereas the age group is 18-24 for PacSun. I would argue that skateboard sales would be more likely to appeal to the younger demographic than the college-aged demographic that seems to be interacting with PacSun on Facebook.
Good summary of the report and call. It's worth noting that in the call, in response to an analyst's question about Redbox, Ann Daly of DWA stated that they have found that rental of family titles can often be an incentive to purchase the title.
http://seekingalpha.co...
Thanks for your comment. On February 16, 2012, in between the time that this article was initially submitted and when it was published, the CEO of Bombardier discussed the possibility of listing on the NYSE with Jim Cramer on Mad Money. The CEO stated that he thinks listing on the NYSE is not a priority for now, but that he also thinks it is something in the future of Bombardier. Here is a link to the interview: http://bit.ly/yoOuWG
Thanks for the comment. The $98 billion "cash" number has been widely reported in the media, including the article linked to Apple's cash per share in this article. Here is a link to Apple's last quarterly report. Note the numbers reported are in millions:
http://bit.ly/wpxF9m
Cash & cash equivalents: $10,310 multiplied by a million (=$10.3 Billion)
Short term marketable securities: $19,846 multiplied by a million (=$19.8 Billion)
Long term marketable securities: $67,445 multiplied by a million = ($67.4 Billion)
Sum: Approximately $98 Billion
Investopedia defines "marketable securities" as "Very liquid securities that can be converted into cash quickly at a reasonable price." The link to that is below.
http://bit.ly/A7wwy3
I look at DWA's pipeline in this new Seeking Alpha article:
http://seekingalpha.co...
Thanks, according to Box Office Mojo, the budgets for their last six releases were:
Puss In Boots: $130 million
Kung Fu Panda 2: $150 million
Megamind: $130 million
Shrek Forever After: $165 million
How to Train Your Dragon: $165 million
Monsters vs. Aliens $175 million
Wikipedia's Dreamworks Animation entry has a chart summarizing the budget of all of DWA's released movies, although it does not appear to cite a source for the information within the chart. Anyone researching this topic ought to confirm the actual costs from any financial information released by the company.
Links to sources of all numbers appearing in this article were included in the article. In this case, the source was Yahoo Finance. While their calculation may have been incorrect based on their own key statistics of shares short and float, the main point of this article is that there is a high short interest in this stock, even at approximately 25% of the float, and to examine some potential explanations as to why the short interest may be high.
Thank you for pointing that out. It is true that Yahoo ought to have calculated 24.8% if they used their key statistics of the float and shares short. A request has been made to Seeking Alpha to correct the hyperlink to link to WSJ.com which indicates a number of approximately 25%.