brombonz

August Same-Store Sales Roundup

Isn't it about time that people in the financial media stop giving respect to the "estimates" guessing game? It's bad enough when applied to quarterly earnings, but becomes absolutely ridiculous applied to monthly sales reports.

Isn't it obvious that what matters is the change from the comparable period (or the monthly number as part of a pattern of monthly numbers for that company) or how the sales report in itself or as part of a pattern compares to that of peers, not even beginning to consider the relative impact of markdowns on the sales numbers and their implications for earnings, not what analysts estimate, with something like a 15% accuracy record.

It is mindboggling that reviews of analyst ratings (most based on predicted earnings changes) over the last several years have found
that the most rewarding buys are those earmarked "sell" by the analysts, the net best returns come from recommended "holds," and the worst from recommended "buys."

This same skill when applied to same store sales finds that the list above comes close enough to the reported comp to be considered accurate in predicting the number (whatever that number is worth in isolation) for by my reckoning six (JWN, TJX, LTD, BJ, FDO and FRED), or 15%, of the 40 companies for which estimates were made.

I've followed specialty retail, especially apparel, sporting goods and variety, closely for the last nine years, and since whenever this "estimating" disease took hold this kind of whistling-oin-the-wind inaccuracy has been the norm.

I just don't get it.

But this reference to variation from a "consensus" estimate is now a virtually standard reference in the lead of earnings or comp-sales related news stories throughout the financial media.

And it is meaningless in relation to a company's prospects.

To me it seems to be merely a fast shuffle creating more trading commissions and profits for brokers and trading firms.

Bad Year for Chico's, but Worth Holding On to the Stock

Your latest comment seems to imply that the Aug.26 posting of "worst year ever" was based on the [approximately] 50% price drop in 2006. However, your message of that date was entirely about fundamental oerformance, and on that basis fiscal 1994 and 1995 were far worse than is likely for 2006. None of this is material to what happens now, so forgive me if you consider this nitpicking. I just don't like to see a misstatement that can be carried farther and so possibly in itself do damage to the stock price, especially since the postings (including your own) that I've read so far on seekingalpha are both more thoughtful and more lucid than most posted elsewhere.

Bad Year for Chico's, but Worth Holding On to the Stock

I read your several CHS postings only recently, and I must correct a false statement that introduces this Aug. 26th letter. Throught the third fiscal quarter, 2006 is NOT the worst year CHS has experienced as a public company.

It went public in 1993. In the fiscal year ended Jan. 1, 1995, net income declined from $4.9 million in the prior year to $3.3 million, and continued to decline in the year ended Dec.31,1995 to $1.7 million (also the same result in the pro forma fiscal year ended Jan. 28, 1996 following conversion to the "retail" calendar year from the standard calendar year.

EPS declined on shares then outstanding from $.62 to $.42 to $.22 ($.21 in the pro forma year).

Net sales per store declined from $647 to $613 to $527 ($537 pro forma).

Net sales per selling square foot declined from $496 to $478 to $413 ($405 pro forma),

Same stores sales went from +12.1% to -7.3% to -10.4% (10.1% pro forma).

In the fiscal year ended Jan. 1, 1995 working capital decreased from $4.8 million to $1.5 million (rebounding the next year to $4.5 million or $5.4 million pro forma).

Operating margin dropped from 18.9% to 10.3% to 6.0% (5.9% pro forma).

To my way of thinking these results in what the company would now call Fiscal 1994 and 1995 do not allow 2006 to be characterized as the worst year for CHS in its history as a public company.

I make this comment in hopes that you will amend any future "worst year" statement to fit the facts (that is, by tightening the time frame),

I have no quarrel with any of the substantive statements made about CHS in any of the comments listed here. I've followed the stock since 1998 and owned it since Feb. 2000. I also own a large number of other apparel/footwear retailers and suppliers.