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- 2013 - January - 21st -

Body Central turnaround taking longer than expected

by Mark Basch, Contributing Writer

While Body Central Corp. gets off to a fresh start in the new year with plans to move its headquarters from Jacksonville's Southside to the Northside, the company is still saddled with problems left over from the old year.

Body Central last week lowered its earnings forecast for the fourth quarter and said the turnaround in its business, which began slumping in May 2012, will take longer than expected.

Body Central said total sales in the fourth quarter, which include sales at its 276 young women's fashion stores and online and catalog sales, rose just 0.4 percent to $81 million. Comparable-store sales dropped by 11.6 percent.

Comparable-store sales are sales at stores open for more than one year and are a key indicator of a retailer's performance. The big drop in the fourth quarter was not a surprise, since Body Central already had projected comparable-store sales to fall between 11 percent and 14 percent.

But the company said it had to rely more on promotions to sell merchandise in December than it expected, resulting in lower profit margins.

Because of that, Body Central expects to report earnings of 10 cents to 12 cents a share when final results for the quarter are reported, down from its previous forecast of 19 cents to 22 cents.

Robert W. Baird analyst Erika Maschmeyer said in a research note that the company "was running ahead of guidance after a strong Thanksgiving week, but was forced to run an unprecedented buy one, get 50 percent off promotion ahead of Christmas, which in addition to heavy markdowns, crippled margins."

Maschmeyer, who maintains a "neutral" rating on the stock, said Body Central "took necessary markdowns in the fourth quarter to enter the first quarter with inventory growth near or slightly below sales growth."

Interim CEO Tom Stoltz said in a news release that it was a disappointing quarter.

"While we believe that our current initiatives will have a positive impact on the business, we now anticipate that it will be later in 2013 before they have a meaningful impact on our performance," Stoltz said.

Oppenheimer & Co. analyst Pamela Quintiliano lowered her rating on Body Central from "outperform" to "perform" after last week's announcement.

"While we continue to have confidence in the underlying fundamentals of Body Central, as well as the initiatives in place to support future growth, near term could prove to be choppy. As such, we need further proof that the turnaround has gained traction before becoming more constructive," Quintiliano said in a research note.

Stoltz has been interim CEO since former chief executive Allen Weinstein resigned in August. The lack of a permanent CEO does not seem to be impacting the company's planning, as Body Central earlier this month applied for $1.39 million in City and state incentives to expand and move its headquarters and distribution operations to One Imeson Center on the Northside.

While analysts say Stoltz is a candidate for the full-time job, the company has not indicated a timetable for naming a permanent CEO. That uncertainty is affecting Body Central's stock, as "leadership turmoil clouds the already-limited visibility around timing of a turnaround," Maschmeyer said.

"We believe the stock will remain range bound until investors gain clarity around new management," she said.

Body Central's stock fell $1.41 to $8.30 on Tuesday after its latest report. The stock peaked at $30.93 last May before it issued the first of a series of disappointing sales reports, and fell as low as $7.71 last summer.

Shoe Carnival earnings on track

Shoe Carnival Inc. last week said that its sales for the fourth quarter ending Feb. 2 are expected to be lower than it previously forecasted. But unlike Body Central, profit margins improved. So the footwear chain controlled by former Jacksonville Jaguars owners Wayne Weaver said earnings for the quarter remain on track.

Total sales for the quarter are expected to be between $212 million and $214 million, with comparable-store sales higher by about 1 percent. Shoe Carnival previously projected sales of $215 million to $220 million with a comparable-store sales gain of 2 percent to 4 percent.

However, the company still expects earnings of 20 cents to 22 cents per share, in line with its forecast of 19 cents to 23 cents. So despite the sales disappointment, Shoe Carnival's stock rose 51 cents to $20.32 on Tuesday after the announcement.

"Although comparable store sales were below our expectations, the combination of higher than expected margins and expenses that were tightly controlled helped us generate earnings in line with our previous guidance," Shoe Carnival CEO Cliff Sifford said in a news release.

Sifford said unseasonably warm weather early in the fourth quarter hurt sales, but sales improved later in the quarter.

Weaver is chairman of Shoe Carnival and the largest shareholder, controlling 24.5 percent of the stock.

Flowers stock rises on Hostess agreement

Investors seem to like Flowers Foods Inc.'s plans to buy Hostess Brands Inc.'s bread brands and bakeries, including the former Hostess bakery in Jacksonville.

Flowers' stock rose from $24.83 at the end of the previous week to a record high of $27.25 by Tuesday after Flowers announced its $390 million agreements to buy the Hostess bread operations.

Thomasville, Ga.-based Flowers already has a bakery in Jacksonville that produces bread and buns under the Nature's Own and Sunbeam brands, so it is not clear what the company would do with a second local bakery.

Flowers spokesman Keith Hancock said last week it is too early to speculate on what the company would do with that bakery or if it would hire back some of the 128 Hostess employees who lost their jobs when the bakery closed in November. The Hostess bakery was producing Merita brand breads.

Flowers can't even be certain at this point if it will be able to buy the 20 Hostess bakeries covered under the agreement, because the deal is contingent on no higher bids emerging at a bankruptcy court auction next month.

Flowers said in a Securities and Exchange Commission filing last week that if it does remain the high bidder at the auction, it would be able to close on the sale about 30 days later.

Save-A-Lot bringing 'test market' plan to Jacksonville

The Save-A-Lot supermarket chain plans to extend a test market strategy already under way in Kansas City and St. Louis to its Jacksonville stores, according to the CEO of its parent company, Supervalu Inc.

What that means isn't really clear. A Save-A-Lot spokeswoman did not respond to voice mail and email messages last week.

Supervalu CEO Wayne Sales said in the company's quarterly conference call that the supermarket operator plans to roll out the test market strategies to the Jacksonville market, according to a transcript of the call posted by the company.

Chief Financial Officer Sherry Smith said in the call that the plan involves a "new price program" that generated higher comparable-store sales in the other test markets, but company officials gave no other details.

Supervalu operates 10 Save-A-Lot grocery stores in the Jacksonville market, according to its web site. Save-A-Lot has 1,300 stores overall.

Minneapolis-based Supervalu operates a number of supermarket chains under different banners. It recently announced a plan to sell several of those chains – including Albertsons, which left the Jacksonville market in 2005 – for $3.3 billion to an affiliate of Cerberus Capital Management L.P.

Supervalu said Save-A-Lot and its other remaining chains plus its food wholesale business will still generate $17 billion in annual sales.

UPS calls off TNT deal

United Parcel Service Inc. last week announced that it is giving up on its planned acquisition of TNT Express, because of opposition to the deal by the European Commission.

UPS agreed to buy TNT in March 2012 for $6.8 billion, hoping the acquisition of the Netherlands-based company would expand its presence in the package delivery market in Europe. However, the European Commission raised concerns about the competitive effects of the merger and informed UPS that it will oppose it.

"We are extremely disappointed with the EC's position. We proposed significant and tangible remedies designed to address the EC's concerns with the transaction. The combined company would have been transformative for the logistics industry, bringing meaningful benefits to consumers and customers around the world, while supporting growth in Europe in particular," UPS Chief Executive Scott Davis said in a news release.

TNT Express was spun off from a company called TNT NV, which had a logistics division with its North American headquarters in Jacksonville.

The logistics business was sold in 2006 to private equity firm Apollo Management, which renamed it CEVA Logistics.

Genesee cuts 26 more RailAmerica jobs

Genesee & Wyoming Inc. said in an SEC filing last week that it cut 26 more jobs from the former operations of Jacksonville-based RailAmerica Inc. This followed the dismissal of 13 senior executives of RailAmerica in December.

The company said the objective of the latest round of cuts "was to eliminate duplicative managerial and staff positions and minimize compensation expense."

Connecticut-based Genesee filed a notice in December under the Worker Adjustment and Retraining Notification Act saying it could cut a total of 50 jobs from RailAmerica's headquarters operations after the merger of the two short-line railroad operators. Genesee took control of RailAmerica's operations in late December.

Genesee said in last week's SEC filing that it is continuing to look at consolidation of other administrative and back office functions.

Jacksonville Bancorp may do reverse stock split

Jacksonville Bancorp Inc. is considering a reverse stock split to lift its stock price and make sure the company can keep its Nasdaq listing, according to a proxy statement filed in connection with a recent capital-raising deal.

The proxy statement was filed after a group of investors, including the company's largest shareholder, CapGen Capital Group IV LP, bought $50 million in preferred stock at the end of 2012.

The bank intends for those preferred shares to be converted into common shares, but the company needs shareholder approval for that. A special meeting to approve the conversion is scheduled for Feb. 13.

The proxy statement filed for that meeting also asks shareholders to authorize the board of directors to implement a reverse split of Jacksonville Bancorp's common stock, at a ratio of up to 1-to-20. That would mean shareholders would end up with one share for every 20 they currently own.

Jacksonville Bancorp's stock price fell below $1 in mid-November and the company received a notice from Nasdaq that it could be delisted if the stock price did not rise back above $1. A reverse stock split would increase the market price of the stock by reducing the total number of shares outstanding.

It may be a moot point, because Jacksonville Bancorp's stock price rose back above $1 on Jan. 8 and stayed there through last week. So it may not actually go through with a reverse split, even if it's authorized by shareholders.

PSS schedules shareholder vote

PSS World Medical Inc. has scheduled a special shareholders meeting for Feb. 19 to vote on its proposed acquisition by McKesson Corp., according to an updated proxy statement filed last week.

McKesson agreed in October to buy the Jacksonville-based medical supply distributor for $29 a share, a total of $1.48 billion.

Trailer Bridge names CEO

Trailer Bridge Inc. last week named Chris Dombalis as chief executive officer.

The Jacksonville-based marine and truck freight company said Dombalis has more than 30 years of executive experience in the maritime and logistics industries, most recently as executive vice president of Maher Terminals LLC.

Dombalis succeeds Frank Halliwell, who had served as interim CEO since October.

Trailer Bridge emerged from Chapter 11 bankruptcy last March but its reorganization plan never specified how its management would be set up.

The company was publicly traded before filing for Chapter 11 but nearly all of its stock was issued to creditors under the reorganization plan.

Fort Lauderdale-based Seacor Holdings Inc. ended up as the largest Trailer Bridge shareholder with 47 percent of its stock. Seacor was given three seats on Trailer Bridge's seven-member board of directors in the reorganization plan.

Stakool raising its profile

It looks like Stakool Inc. intends to raise its profile in 2013.

The Jacksonville-based company operates a business called Anthus Life Corp., which produces a line of natural and organic and health and wellness products. The development-stage company reported revenue of only $17,388 in the first nine months of 2012.

However, Stakool recently posted an interview online with CEO Peter Hellwig to promote the company to the investor community.

Hellwig said in the interview that he was focused on improving the company's balance sheet last year, and now the company is ready to grow.

"The fact that we have accomplished reducing our debt load, and improving our balance sheet, sets the stage to move the company into its next phase," he said in a news release.

mbasch@baileypub.com

(904) 356-2466

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