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Build-A-Bear: Trading At 60% Of Book Value But Still A Short
Josh, BBW was a great short in early 2007 when it was trading at $27 but one may not have seen it looking thru the rear view mirror. Your analysis is well done, but that doesn't make BBW a good short today: past may be prologue or it may not be.
BBW plans to close 40 to 60 stores and remodel/downsize another 50 or so stores by 2014. With a target store base of 225 to 250 stores by 2014, it means they will impact 40% of the store base with change in two years. (Remodel or sales transfer.) The most recent press release shows that the 6 new prototype stores had average q/q sales growth of 30%. So it's possible that we see BBW play out as a good Bear new co/ bad Bear legacy co.
Before I'd short the stock, I'd love to hear how BBW will run out of money before they can accomplish the closures or remodels or how BBW's new prototypes were really propped up by ad spending that's unsustainable. In other words it's obvious the model hasn't been working for some time, but it's not obvious that the new plan won't work.
Andreas makes a great point about a potential buyout and BML. Brad Leonard is a top value investor. By being on the board, he has a perspective and info we do not have. With a near 14% stake in BBW, BML has a strong financial incentive to see BBW succeed.
Thanks for the write up,
Feb 4 10:29 AM
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McRae Industries: This Company Is Hard Not To Like
Seth, nice article. My valuation analysis of McRae is similar to yours. It's hard to see how this stock doesn't reward folks long term. Also it looks like it has the three best words in investing big time: "Margin of Safety".
To add to your article, shareholders interests are aligned with management. This is a family controlled company with the McRae family controlling 40% of the stock and 60% of the vote. McRae's run the company and are compensated very reasonably.
The catalyst for this company will likely be in March. This is probably when McRae will learn if it has secured additional Military boot contracts. It is true that military spending is tight, however McRae has invested (as you point out) in new boot production capabilities. The new equipment allows McRae to bid on boot constructions it had not previously been able to bid on. So the upgrade opens up the possibility of more Military boot revenue streams for different boot types. It is not simply a plant update.
Feb 16 02:48 AM
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