Posts tagged inventories
The market is higher today on the strength of a banking sector rally, positive economic news from China, and a likely date tonight with Izabel Goulart (because why else would it be this excited?). The macro news today has been slightly positive with wholesale inventories down only .2% sequentially in January after being down 1% in December. While this is the 13th consecutive month of wholesale inventory declines, the second derivative continues to sink like John Meriwether’s hedge fund career and a continued decline in the rate of inventory cuts is certinaly a positive sign. The Commerce Department, led by esteemed Secretary Gary Faye “Reagan” Locke also said that sales were up 1.3% and that dropped the ratio of inventories to sales to a record low of 1.10. This is an interesting metric as company inventories are now leaner than James Polk’s credentials in 1844 or Adam Sandler’s Oscar trophy shelf. If the economy can somehow forget about the 10% unemployment rate, the mounds of money printed by the US government, and Hillary Swank’s Academy Awards dress (and really, where did those come from?), and just start to gradually build back some inventories there could be some real recovery, despite what the great Roubini is out saying today about the increasing odds of a double dip recession (ugh). New unemployment data is also out at the state level with the unemployment rate increasing in 30 states (though more if one includes the states of panic, fear, and pants shitting) and decreasing in 9. One of the states to see declining unemployment was Michigan where the rate dropped from a national high of 14.5% to a still “you’re fucked” rate of 14.3%. But those three extra people who got hired to man the Burger King drive-through line in Kalamazoo could be a signal (unfortunately that signal is “we need some fucking jobs”).
In international news, Greece’s economic crisis is more over than Corey Haim (what, too soon?) according to Romano Prodi who is a former Italian Prime Minister, now teaching at a college in Shanghai. Money McBags has always said if you can’t trust an Italian Prime Minister, especially one who has been out of office for years and has had absolutley no real role in anything having to do with the Greek crisis, then you can’t trust anyone. Prodi will continue his “speaking out of my ass” tour by taking part in a roundtable on how global warming has finally ended before chairing a conference on the demise of the internet. Also fueling the market today is that China’s exports rose 46%. This likely signals increased consumer demand for products that cause nervous system and kidney damage to infants, or as they are more commonly known as: toys. Infant nephrologists across the nation are excited by this uptick in China and are anxiously awaiting orders of their new CT scan machines to be delivered.
In market news, the always delightful Dick “Don’t call me Richard” Bove (with the last syllable of Bove pronounced like the last syllable of oy-vey), was on CNBC talking up the financial sector. Mr. Bove (Money McBags refuses to call anyone Dick), said he thinks bank dividends will go back up to their previous levels in the next two years and he gave a vote of confidence to Citi. And let Money McBags tell you, getting a vote of confidence from an analyst who missed the symptoms of the ride down is as valuable as being dong-less in Vietnam (though to be fair, they all missed the ride down except perhaps the lovely Meredith Whitney whom Money McBags has such a crush on that he would body slam Mr. Whitney and put him in the Camel Clutch were he ever to meet him).
In small cap news, WILC had their quarter last week and Money McBags promised he would break it down for all of you this week. Unfortunately, Money McBags needed a fucking talmudic scholar to decipher WILC’s press release as it was more confusing than a plague of frogs (no really, you’re doling out 10 plagues and frogs is the best you can do for one of them? Really? You ever hear of small pox, syphilis, or grizzly bears?). Money McBags wonders if he should have read the release from right to left to better understand exactly which numbers were real numbers and what went in to them. Unsurprisingly, WILC’s conference call contained enough jibberish and was hard enough to hear that it made the press release look like a fucking Dr. Seuss book. Between COO Zwi Williger’s accent and the fact that they refused to take questions, WILC’s conference call was as helpful as giving a band aid to a hemophiliac or an all expense paid trip to the Mustang Ranch to a eunuch. Seriously guys, you’re running a fucking public company, can you at least, you know, present the information in a user friendly manner to your shareholders (and Money McBags is a shareholder). Anyway, on the surface, their Q was pretty good. They grew sales 12% in NIS (New Israel Shekels) and increased their gross margins which they said was the result of continuing to introduce new higher margin products. They said they earned $.20 per share in US which puts them at $.80 for the year. They have $26MM of cash on the balance sheet which is roughly 1/3 of their market cap. That said, their selling expense was up as a % of sales from 11% to 15% which they attribute to promotions, and their G&A was up as a % of sales as a result of management bonuses. On the call they also talked about product launches to a big box US/Canadian retailer but ZWI’s accent was thicker than the always lovely Carmella Bing so Money McBags could not make out to whom or to what he was referring. Now look, Money McBags is also a Jew and while his hebrew language skills are more non-existent than Satyrs, weapons of mass destruction in Iraq, or money shots in lesbian porn, he honestly feels he would have got more out of the call had ZWI just spoken in his native language. The most confounding part was that he did not take any questions, citing their pending share offering of $20MM. Come on Zwi let’s sit down and talk about this yid to yid. We can kibbitz a bit about the old days and all of the shiksas we’d like to have boned, but just be fucking honest with me so we can avoid any Jew on Jew crime. If you’re not going to take questions on the call, then perhaps you’ll answer them here for your shareholders. Below are things investors need to know:
1. Why is there no quarterly income statement or cash flow statement? Why only give the annual summary? For fucksake, even in your share registration statement you filed with the SEC the day of the earnings release, you only include Q3 numbers. WTF? Can you give your shareholders a break and just give us the information without making us break out excel and remember how to run a fucking vlookup table?
2. Along those lines, you quote a $.20 eps and a net income of $2.12MM. Yet in the same paragraph you say income before taxes was $1.84MM. Now look, I’m no Harry Markopolos, but how the fuck is your net income higher than income before taxes seeing as how you are a tax payer? Honestly, this is more confusing than a Thomas Pynchon novel or trying to figure out exactly of what Captain Crunch is the captain (and don’t say crunch). Money McBags broke out his proverbial magnifying glass and it looks like $.04 of your $.20 eps this Q was from discontinued operations. And that extra $.04 is almost enough to meet the discrepancy. Even if that is not the discrepancy, why the fuck are you quoting earnings of $.20 when only $.16 of it was from continuing operations?? As of 9/30/09 you had earned $.59 per share with $0 from discontinued operations and for the year you earned $.79 with $.04 coming from discontinued operations. So that sounds like a $.16 Q4 to me. So why would you quote the $.20 number? Work with me here.
3. How much of your increased gross margin was due to currency effects? It’s great that margins are rising but you have talked about the advantage you get through currency differences between your costs and revenues, so would it kill you to break that out for us? You said some of the margin increase was due to selling higher margin products, but how much? Could you do shareholders a mitzvah here and let us know how the actual business is tracking ex. currency effects?
4. Why did your cash balance go down in the quarter if you were profitable? Since there was no cash flow statement, Money McBags had to copy/paste the last two balance sheets into his outdated excel and use the delicious text-to-columns feature just to figure out what was going on and let me tell you, when Money McBags has to start breaking out old school excel functions, he is less happy than Mark Sanford’s wife on a family trip to Argentina. You earned $2.1MM from continued and discontinued operations and yet your cash balance was down by about $2MM. With your PP&E remaining about the same (and in Money McBags younger club days, he would often see people pee-peeing some E) it looks like the cash outflow was from a $4.5MM increase in inventory and $2.5MM increase in trade receivables. Hmmmmmmmm. Care to answer WTF caused this cash decline?
5. As related to what we found in question 4, why did inventories go up by more than 50%? Seriously, can you help me on this one? Is this a normal seasonal inventory tick-up of matzo, gefilte fish, and grape juice for the upcoming Passover seders or is something else going on here? You said you are launching more products so is this the ramp up of that?
6. Why are you raising $20MM? Is this really related to expansion or does this have to do with the declining cash balance in the quarter? You have $26MM of cash on your balance sheet and are a $75MM market cap company, why do you need to dilute share holders by 20%ish to bring in $20MM? You have stated that you are looking to buy a distribution center in the US or form a JV, but do you really need to an additional $20MM for that kind of acquisition?
So ZWI, if you’re reading this, and I know you are, can you help a fellow semite out a bit? I mean it’s not like I am asking you where the afikoman is (don’t tell me, it’s in the bookcase?), just help me analyze your actual business. Money McBags wants to be a longterm shareholder but he is thinking about selling despite the ridiculously cheap valuation because he is not clear what the actual earnings power is. You said you will answer questions after the share offering which will likely include or be followed shortly thereafter by some “important announcement” (hopefully that announcement isn’t that you have run off with the cash), but can you tickle Money McBags’ balls just a bit here and give some real information? And let Money McBags be brutally honest with you, if you ever quote your eps/net income number again and include discontinued operations, Money McBags will go to the Wailing Wall and pray for someone else to take over the company. The whole press release/call/equity raise is just so fucking meshugganah that shareholders need to know you are not boozing on Manischewitz and can actually run a public company.
The dreidle is in your court Zwi. You know where to reach me. MoneyMcbags@gmail.com or www.twitter.com/moneymcbags. I’ll be here all day.
2/17/10 Midevening Report: Fed hints at reversing stimulus, starts by canceling Bernanke’s Playboy subscription
The market was up today like a hooker’s skirt in Tiger Wood’s SUV. The rally was driven by earnings, earnings, earnings and some macro data. Apparently people are still building houses as housing starts hit their 6-month high, rising 2.8% to an annual rate of 591k. This marginally beat expectations and should be a good sign for the economy, even if half of the houses were built from legos and the other half have already been forelcosed on. In other macro news, the Fed announced that industrial output grew .9% which also beat expectations with capacity utilization coming in at 72%, 8% below the average from the last 37 years. So there is still room for the economy to rebound and thus produce more of those delightful “For Sale” signs to go in front yards, printers to print out resumes, and muzzles to put over Lady Gaga’s face. Also, import prices rose by 1.4% signalling inflation may be on the way (and for those of you who need a less subtle signal: INFLATION IS COMING!! And Ben Bernanke is going to have to make inflation think long and hard about baseball for him to try to stop it from coming). Many analysts were unphased by the rise in import prices claiming oil and natural gas drove up prices, so I guess it’s good we don’t rely on those fuels at all or else we might have to worry a bit more about the dollar. Phew.
There was one piece of macro news which caused a brief sell-off before the market put back on its pearl necklace and returned to the ball (and yes, all of those were very bad puns). The minutes came out today from the last FOMC meeting and the head of the Kansas City branch of the Fed, Thomas Hoenig (known at the Fed as T-Ho), was the one dissenting vote on interest rates. T-Ho got all up in Benny B’s grill and axed him why they needed to say the fed funds rate would remain low for an “extended period,” preferring to change the language to say the fed funds rate would remain low for “some time, and shit.” The minutes also revealed that the Fed is starting to look at downsizing their balance sheet and selling into the market the toxic assets, I mean mortgages, they previously bought. The key message here being that further stimulus to help the economy may be less likely than Brooklyn Decker dumping Andy Roddick for the first guy eliminated from next season’s The Biggest Loser. The Fed might actually be doing something smart here by looking to get in front of a bubble and stopping it before it happens rather than pulling an Alan Greenspan and blowing hot air into it like it was Andrea Mitchell’s rectum.
In earnings news, Deere’s profit climbed 19% and they raised forecasts thanks to strength in “large ag equipment”, or what’s more commonly known as: “Rosie O’Donnell’s dildos.” Also, WFMI not only had a kashi-tastic quarter as Money McBags predicted yesterday, but is was double fiber kashi-tastic. WFMI same store sales were up 3.5% and they gave total revenue guidance for 10.5% growth in 2010 while raising full year earnings guidance to $1.20 to $1.25 per share, about 10% above current estimates. Yeah, it was a good Q but they are now trading at around 25x 2011 earnings which wouldn’t be so bad if they were growing by more than 10%. Of course, EBITDA was up 25% and they raised EBITDA guidance by about 5% to $635MM-$685MM for 2010 which means they’re trading at around 7x to 7.5x 2010 EV/EBITDA which actually isn’t all that unreasonable. Money McBag’s guess is that there was a whole lot of short covering today and in the next couple of weeks WFMI will come down a bit, but it is still trendier than Jessica Biel giving free blow jobs to bloggers (and trust me, that is going to be a huge trend).
In small cap news, RICK reported yesterday and they managed to not only shit the bed, but then they announced they were going to buy VCGH and shit all over their bed too (though to be fair, VCGH’s bed was plenty shitty to begin with). Money McBags never thought he would be unhappy getting fucked by someone at RICK, and RICK not only fucked him, but they sent the 40 year old C-section showing, needle marks in the arm having, 2pm shift D-team dancer to do the job. Jeesh. Could they at least kiss me next time before they fuck me? Actually, scratch that. I mean I love the lovely ladies at Rick’s who express themselves through dance to pay their college tuition, but they probably have more lip herpes than Richard Simmons has anal warts, so they can hold off on the kissing. Anyway, RICK reported the quarter that Money McBags had feared since they bought their Las Vegas club. You see, in order to win business in Vegas, Rick’s pays the fuck out of cab drivers to bring patrons to their club. It is labeled as marketing costs, but it is payment of cash to cab drivers as clubs compete for traffic. All of the clubs kind of collude to keep that price to around $20, but to gain business and to slap their cocks on the table and let other club owners know they are serious, RICK had been occasionally upping the ante to as much as $100. Well it looks like in this quarter that occasional upped ante was both not occasional and was so far up that it gave itself a cerebral edema from hypobaropathy. Rick’s marketing costs soared by $1.7MM to $2.9MM and treated their earnings like an Alabama professor after learning she wouldn’t be tenured. Now on the call they said the marketing increase was related to more than just the Vegas club and that the Vegas club turned a profit in January and should be profitable for this Q, so that makes Money McBags feel a bit better, like how Jessica Simpson felt when she learned stupidity wasn’t contagious, but it is a huge red flag. Their earnings missed the high end by $.08 which is actually slightly less than the uptick in marketing costs. Revenue was up a healthy 16.5% but it was achieved in the most unhealthy way, by paying people/cab drivers to show up. To Money McBags it is a huge concern and kept him out of the stock until a few months ago. Now on top of their shittastic performance, they announced a $45MM cash and stock acquisition of VCGH which will make them the largest strip club operator in the world. While Money McBags is a firm believer in bigger is better (such as the fine backsides of Carmen Kinsley and Alexis Texas), this deal has a ton of dilution as Rick is going to have to issue somwhere around 2.5MM shares and thus increase their share count by 25%. Rick’s maintins that they will benefit from synergies such as corporate overhead, regional management, and shared thongs, and thinks EBITDA will be $25MM for the combined company. They also reaffirmed guidance for 2010 without VCGH of $.90 to $1.05 per share, so they are still fairly cheap on a p/e basis. The biggest problem is that Money McBags can’t really analyze this deal because VCGH stopped filing financials months ago so there is no way to understand if their clubs are even remotely profitable. So you have a shitty quarter, a questionable deal, and a stock that has been on the move but is still cheap if you believe the marketing uptick was a one-time offense (and Money McBags has no idea about that). If you own RICK, it might not be a bad idea to trim a bit here, and if you’re at Rick’s, it might not be a bad idea to see some trim there. Alot of questions remain after this call such as will decreasing marketing costs hurt top line, what does Rick’s new cap structure look like, and can a brother get a table dance? Unfortunately, after this quarter there will be no sex in Money McBags’ champagne room and for those RICK’s owners, you should really due some more work. Money McBags is holding for now, but leaning towards selling some as it’s unclear how RICK will still hit their guidance for the year after missing this Q and how they will grow if they lower marketing costs, since if lower marketing costs were to allow them to grow, why wouldn’t they have been lower this Q? Damn you logic.
1/14/10 Midday Report: Market taunts macroeconomy, tells it to go back to its room until it comes out with a better number
The macro news today mostly missed expectations, but the market seems to be shrugging it off like an alcoholic shrugs off a jagermeister induced hangover (and that is by taking a massive dump and then getting back on the wagon). Retail sales were down .3% for the month of December, while expectations were for a .5% rise. The decline was led by consumer electronics sales which were down 2.8% as people remain happy with their 6 month old iPhones. Economists are now hoping that the introduction of Roxxxy will help stimulate electronics sales in the coming months (bad puns completely intended). Of course the main driver of the decline in consumer spend is that people still don’t have jobs. 11k more people filed new claims for unemployment last week over the previous week, raising the number of newly employed to 440k which is almost the population of Wyoming or the number of movies from 1985 starring Ron Jeremy (and Money McBags maintains the tour de force known as Snatchbuckler has been overlooked by critics for way too long). The slight positive is that the four week average is trending down so as long as you chalk up the current weekly claims to volatitily and not a new trend, employment may be headed in the right direction, or at least not down.
One other interesting macro note is that business inventories rose for the second consecutive month, ticking up .4%. This is interesting because inventories could be moving back up just as consumer spend starts trickling back down. Since we know companies are as good at managing inventory and predicting future sales as Louisiana is at building levees or NBC is at running late night talk shows (and for the record, Money McBags was a fan of Conan O’Brien until he neutered himself to take over the Tonight Show), it would not be surprising to see the US reach excess inventory levels once again (cough, WGO, cough) if the job market remains as bleak as Octomom’s vagina (seriously, you put 8 kids through one of those and nothing good can happen). The economy seems to have reached an inflection point as the magical supply and demand curves try to stop shifting and meet a happy equilibrium (and hopefully not a prisoner’s dilemma non-pareto equilibrium), but there should be a concern that businesses build inventories back up too much and thus the recession falls back in on itself like a dying star and creates another economic black hole, or as it’s called in the Spelling household, Tori.
In stock news today, the market eagerly awaits INTC’s earnings tonight like Brian Dunkleman awaits another hit show and like Money McBags awaits Hayley Atwell‘s first nude scene (And Hayley, if you’re reading this, and I know you are, could we at lest get a nip slip or a thong wearing upskirt?). Investors hope for a strong Q from INTC in order to keep the market momentum going. Also, CROX is up 12% as they are said to be doubling their sales force and stores in India. Crocs’ representatives maintain Indian tastes are rapidly changing and are now only seven fads behind the US. They believe Crocs shoes are the perfect compliment to 30 year old Members Only jackets and will comfortably snuggle the feet of hardworking Indians as they watch reruns of Hawaii Five-O and wonder who shot JR.