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Still Room For Lifetime Brands To Outperform

|Includes: Lifetime Brands, Inc. (LCUT)

Economic recovery boosts all businesses across the board, but some tend to benefit more than others do. Such would be those that suffer most during recession. Lifetime Brands (NASDAQ: LCUT) is one of the companies that tend to perform according to economic status. The company engages in the business of selling branded kitchenware and accessories. It designs, sources, and sells branded kitchenware, tabletop, and other products used in the home primarily in the United States. The company has experienced a good performance in 2013, rallying 30 percent to trade at $14.40, as of December 6, 2013. Lifetime Brands hit rock bottom in February 2009, to trade at just about $1.40 per share as the economic recession took its toll.

The Business

As noted earlier, Lifetime Brands engages in the business of selling branded kitchenware. The company also provides home solutions that comprise products such as food storage, pantry ware, spices, and home d├ęcor products, as well as manufacturing sterling silver products. Some people may argue that most of these products are essential, but during tough economic conditions people tend to cut their expenses on such products. Nonetheless, a recovery is usually almost immediate in tandem with economic recovery.

The company's sales tend to be seasonal with a majority of its annual sales generated in the third and fourth quarters. For instance, net sales for the third and fourth quarters accounted for 58 percent, 59 percent, and 60 percent in 2012, 2011, and 2010 respectively. Most of the company's distribution channels are located in New Jersey and California, with the two accounting for 753,000 and 700,000 square feet of space, which sums up to 86 percent of the total distribution.

Lifetime Brands' cumulative performance over the last five years is below the industry average, which means despite its current price levels, there is room for growth. It trades miles below its multi-year highs of $30 achieved in 2006 and has recently topped $16 per share.

Highlights from Recent Results

In the company's most recent quarterly results for the period ended September 30, 2013, Lifetime Brands reported $142 million worth of net sales, representing 11.1 percent growth from $128 million posted for the same period last year. Distribution expenses barely changed for the quarter. For the nine-month period, distribution expenses declined $31.4 million from last year's $31.9 million. However, the company's income tax rate increased significantly, while the company also posted a huge loss on equity worth $5.4 million, effectively leading to a decrease in net profits. Therefore, net income in Q3 fell from $3.8 million to just over $1 million, while the company reported a loss for the nine-month period. Nonetheless, the overall picture, excluding unusual items looks attractive going into the company's fourth fiscal quarter, with results coming early next year.


Lifetime Brands faces solid competition from various industry rivals, but the most direct competitor both in the business of branded kitchenware and in the stock market is Newell Rubbermaid Inc. (NYSE: NWL). Others include privately held The Pampered Chef Ltd, and WKI Holding Company Inc. Lifetime Brands appears to be attractively valued at 12.15x in P/E ratio when compared to Newell, which has a P/E ratio of 19.65.

The bottom line is, with the economic recovery showing solid promise for sustainable growth, Lifetime Brands can now concentrate on doing business without worrying much about the economy. The company has a lot of catching up left to do, despite having shown decent performances in 2013. Lifetime Brands still has room to outperform.