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Jax Daily Record Monday, Aug. 5, 201312:00 PM EST

Body Central reports surprising loss as turnaround slows

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by: Mark Basch Contributing Writer

While Body Central Corp.'s sales have been slumping for more than a year, the Jacksonville-based young women's fashion retailer had managed to remain profitable while it tried to turn the sales trends around.

So it came as quite a surprise Thursday when Body Central reported a net loss for the second quarter. The company also said its turnaround, which was expected to take hold in the second half of this year, will take longer than it anticipated.

Body Central reported an adjusted net loss of $2.4 million, or 15 cents a share. Including a write-off related to its catalog business, the final net loss was $12.8 million, or 78 cents a share.

"As I said to you before, we expected the first half of the year to be tough, and the second quarter proved to be tougher than expected," CEO Brian Woolf said in a conference call with analysts.

He said the company had to take steps to clear out slow-moving spring and summer merchandise to bring in back-to-school fashions, resulting in increased inventory in its stores. He is optimistic about the new merchandise.

"We are confident that it is the right product assortment for our customer and gives us a meaningful statement in key fashion trends, like denim," he said.

Body Central is working on other initiatives to increase sales, including a new prototype store scheduled to open in Orange Park in November. However, it will likely take longer to see improved results.

"While we fully expect our initiatives to take hold, near-term business will likely remain challenging and require a more promotional environment in our stores," Woolf said.

Piper Jaffray analyst Stephanie Wissink said in a research note that she expects Body Central's recovery to be delayed by six to 12 months.

"Structural alignment and merchandise corrections are just the first steps in a recovery journey. Re-attracting the core customer, inspiring conversion, and rebuilding the growth momentum will take time — seasons and years, not months," she said.

Wissink is now projecting a net loss for the full year, but "the severity of the operating loss will remain unclear until we see signs of inflection in the business model."

William Blair analyst Sharon Zackia is still projecting a net profit, but she reduced her estimate on that profit from 54 cents a share to 2 cents.

Body Central's stock plunged by $4.04 to $7.92 at the opening bell Friday after the late Thursday announcement. It closed Friday at $8.10.

EverBank buries the good news

When corporations have negative news to report, they usually find a way to put a positive spin on the announcement.

That's why it was a bit unusual to see that EverBank Financial Corp. buried some positive news when it announced job cutbacks last week.

The Jacksonville-based bank issued a news release Monday to announce it was closing its wholesale broker home lending business to focus more on retail lending channels.

In other words, instead of offering mortgage products through brokers, it will rely more on direct lending to homebuyers.

EverBank said in the release it is cutting 150 jobs in Jacksonville, Dallas and Sacramento because of this move. The company later said 48 of those jobs are in Jacksonville.

However, the release said nothing about the increase in jobs that will result from its new retail focus. EverBank President Blake Wilson mentioned it Tuesday morning during the company's quarterly conference call with analysts to discuss earnings.

"In the (second) quarter, we added approximately 100 retail lending professionals and plan to continue to expand this channel by attracting high-performing lending talent in our target markets," Wilson said.

EverBank later said 17 of those jobs were in Jacksonville.

So EverBank reported the good news only to the far smaller audience who listened to the conference call.

Meanwhile, EverBank reported second-quarter earnings rose 2 percent to $37.3 million. Earnings per share fell by 5 cents to 28 cents, because the company had fewer average shares outstanding in the second quarter of 2012, when it completed its initial public offering.

Chairman and CEO Robert Clements was happy with the company's performance.

"As you all know, we witnessed a change in market conditions during the quarter as long-term interest rates increased significantly," Clements said in the conference call.

"We believe the diversity and flexibility of our business model has us uniquely positioned to adapt to the current market environment," he said.

However, Compass Point analyst Kevin Barker thinks EverBank will have difficulty meeting analysts' earnings expectations. He downgraded his rating on the stock from "neutral" to "sell" after the earnings report.

"With the stock trading at about 13 times 2014 estimated EPS and mortgage originations expected to decline considerably over the next couple of quarters, we believe the stock is likely to underperform peers," Barker said in his research report.

"With that being said, we believe management is taking the right steps for the long-term by diversifying its product mix and building out its retail origination channel," he said

Regency Square occupancy drops further

Regency Square Mall's occupancy level dropped even further in the first half of the year, according to a quarterly report from its owner, General Growth Properties Inc.

The mall's 1.4 million square feet of space was just 47.6 percent leased as of June 30, down from 60.1 percent at the end of 2012.

Chicago-based General Growth listed Regency Square's occupancy as "not available" in its first-quarter report.

The company's quarterly reports continue to say that Regency Square has been "transferred to the special servicer," which is trying to renegotiate the loan on the property, without giving more details.

The Daily Record reported in June that a consultant for a distressed debt advisory firm met with City officials for exploratory talks on possible uses for the mall.

A representative of the mayor's office told the Daily Record last week that a potential buyer is currently evaluating the property, but no other details were available.

Regency Center's occupancy strong

Some people still think that Jacksonville-based Regency Centers Corp. owns Regency Square Mall. Actually, a predecessor company did develop and open the mall in 1967, but Regency Centers sold the property in 1991.

Regency Centers' occupancy is actually quite strong. The company last week reported that its 343 shopping centers across the country are 94.3 percent leased.

Regency also reported funds from operations for the second quarter of 68 cents a share, the same as the second quarter of 2012 but 4 cents higher than the average forecast of analysts surveyed by Thomson Financial.

Funds from operations are basically earnings excluding depreciation and amortization expenses and are considered the key metric for evaluating real estate companies.

"Through the second quarter, Regency's team continued to take advantage of robust tenant demand and favorable conditions in the capital and sales markets to execute on all aspects of our strategy and make meaningful progress towards our key objectives," Chairman and CEO Martin "Hap" Stein said in the company's conference call.

Regency also increased its FFO forecast for the full year to a range of $2.53 to $2.58 a share. It was previously forecasting $2.47 to $2.54.

Web.com beats forecasts

Web.com Group Inc. also reported better-than-expected earnings last week. Its adjusted earnings of 51 cents a share were 13 cents higher than last year and 2 cents higher than the average forecasts by analysts and the company.

"Our business strategy is working, and we are optimistic about our ability to accelerate revenue growth as we exit 2013, making progress toward our longer-term target of low-teens revenue growth," Chairman and CEO David Brown said in the company's conference call.

The Jacksonville-based company, which provides website development services for businesses, said adjusted revenue rose 8 percent in the second quarter to $131.4 million.

Web.com projected third-quarter earnings of 51 cents to 52 cents a share, which is in line with analysts' forecasts.

FIS stock drops on earnings report

Fidelity National Information Services Inc., or FIS, reported adjusted second-quarter earnings rose by 5 cents to 71 cents a share.

"The business strategy that we outlined in February of 2012 continues to drive benefits to our company, our clients and our shareholders," Chairman and CEO Frank Martire said in the company's conference call.

That strategy includes a focus on organic growth, rather than growth through acquisitions, and "enhancing shareholder value through a combination of strong financial performance and meaningful share repurchases and dividends," Martire said.

FIS' earnings were a penny higher than the average forecast of analysts surveyed by Thomson Financial, but revenue of $1.51 billion was lower than the average forecast of $1.53 billion.

FIS' stock fell $1.22 to $43.06 Tuesday after the earnings report.

"We suspect investors may have been taking profits yesterday given results slightly below consensus and the considerable appreciation in shares year-to-date," Barclays Capital analyst Darrin Peller said in a research note on Wednesday.

"That said, we believe the company's consistent earnings growth, solid capital return, low volatility, and stable and recurring revenue, warrant a multiple well above 13 times forward earnings and 12 times free cash flow, where shares closed yesterday. We reiterate our 'overweight' rating," he said.

David Koning of Robert W. Baird maintained a "neutral" rating on the stock.

"We view risk/reward as balanced, as we don't see significant near-term catalysts to push the stock higher," Koning said in his research note.

"If the stock continues to fall toward $41, we would likely view valuation as compelling, as the high levels of recurring revenue and strong pattern of execution would likely be enough to get investors interested," he said.

Failed merger costs increase Atlantic Coast Financial loss

Atlantic Coast Financial Corp. last week reported an adjusted second-quarter net loss of $417,000, or 17 cents a share.

The Jacksonville-based banking company also said that costs associated with its rejected merger agreement with Bond Street Holdings Inc. increased its final net loss to $1.55 million, or 62 cents a share.

Shareholders rejected the merger agreement at a special meeting in June after several major stockholders, led by former Chairman Jay Sidhu, opposed the deal.

After the merger fell apart, CEO G. Thomas Frankland resigned and three members of the board of directors said they would not seek re-election.

Three new directors supported by Sidhu will stand for election at Atlantic Coast Financial's regular shareholders meeting next week.

Florida East Coast Holdings profits in quarter

Florida East Coast Holdings Corp. reported its second straight quarterly profit, with net income of $3.8 million in the second quarter.

Revenue rose 14 percent to $66.9 million, according to the company's quarterly report filed with the Securities and Exchange Commission.

The company operates the 351-mile Florida East Coast Railway from Jacksonville to Miami. It had been reporting final net losses every year since it was acquired in 2007 by funds affiliated with Fortress Investment Group.

Florida East Coast continues to file financial reports with the SEC because of publicly issued bonds.

ParkerVision raises more capital

While ParkerVision Inc. is still not seeing any revenue from its wireless radio technology, the Jacksonville-based company continues to attract more capital.

ParkerVision Friday said it agreed to sell 3.7 million shares of common stock for $3.80 each. That will result in gross proceeds of about $14 million.

Publix sales and earnings rise

Publix Super Markets Inc. last week reported second-quarter earnings rose 5 percent to $400.9 million, or 51 cents a share. Total sales rose 3.8 percent to $7 billion and sales at stores open for more than one year rose 2.1 percent.

The Lakeland-based supermarket chain also said that, based on the latest appraisal, its stock price increased from $26.90 to $27.55. Publix's stock is not publicly traded and is made available for sale only to Publix employees.

Coach drops on sales disappointment

Coach Inc.'s stock continued its yo-yo pattern, dropping sharply last week after a disappointing sales report.

The handbag and fashion accessories company, which has a major distribution center in Jacksonville, said adjusted earnings for the fourth quarter ended June 29 rose by 3 cents to 89 cents a share, with total sales rising 6 percent to $1.22 billion.

The earnings matched the average forecast of analysts surveyed by Thomson, but sales were below the average forecast of $1.24 billion.

Also, Coach said sales at North American stores open for more than one year fell 1.7 percent.

Coach also announced that two top executives are leaving — Mike Tucci, president of the North American Group, and Jerry Stritzke, chief operating officer.

Coach's stock dropped $4.55 to $53.30 on Tuesday after the report.

Convergys Corp.'s stock at six-year high

Convergys Corp.'s stock reached a six-year high last week after reporting better-than-expected second-quarter earnings.

Adjusted earnings of 25 cents a share were 6 cents higher than last year and a penny higher than the average analysts' forecast, according to Thomson. The company's stock, which closed at $18.86 on Tuesday before the earnings report, reached a high of $19.91 on Thursday.

Cincinnati-based Convergys, which employs more than 1,000 people in Jacksonville, provides outsourced customer service functions for businesses.

Vulcan stock jumps on earnings

Vulcan Materials Co.'s stock jumped $2.50 to $49.68 Thursday after reporting earnings from continuing operations of 23 cents a share, reversing a loss in the second quarter of 2012 and beating the average analysts' forecast by 9 cents.

The Birmingham, Ala.-based construction material's company's Southern operating group is headquartered in Jacksonville after it acquired Florida Rock Industries Inc. in 2007.

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