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Jax Daily Record Monday, Apr. 28, 201412:00 PM EST

More speculation as Body Central retains investment banking firm

by: Mark Basch Contributing Writer

As if we weren’t speculating enough on the future of Body Central Corp., the Jacksonville-based fashion retailer last week announced that it has retained investment banking firm Houlihan Lokey Capital Inc. “to assist the company in analyzing and considering a wide range of financing, transactional and strategic alternatives.”

That only led to more guessing about what’s next.

Speculation about Body Central began last month when the company said its recent losses raise doubt about its “ability to continue as a going concern” if the cash drain continues. It also put off a planned move to a new and larger headquarters and distribution facility in North Jacksonville until 2015.

In a brief news release Wednesday, Body Central did not give any more details about what kind of deal Houlihan Lokey might come up with for the company.

Body Central’s low stock price has prompted some speculation that a private equity firm might buy it out, but Houlihan Lokey also assists firms with debt restructurings and capital raising.

“While this action could signal that internal options may be fully exhausted and the cash burn has likely persisted, we acknowledge that the advisory process can yield various possible outcomes beyond liquidation,” Piper Jaffray analyst Stephanie Wissink said in a research note Thursday.

“We do think it is a sign that a brokered deal may be the only remaining outcome to preserve equity value,” she said.

Wissink also said it will be difficult for Body Central to quickly turn its sales trends around.

“Further cost take-outs are possible, but it’s difficult to know if cutting into the critical functions will impair the ability to compete in a rapidly evolving retail environment,” she said.

Wissink, one of only two analysts still actively following Body Central, according to Thomson Financial, maintains a “neutral” rating on the stock. She is encouraging investors “to wait on any sign of fundamental stability and the elimination of liquidity concerns before establishing positions.”

Stein Mart promotes two top executives 

Jacksonville’s other fashion retailer, Stein Mart Inc., last week created a new Office of the President and announced that two of its top executives will share that office.

D. Hunt Hawkins, executive vice president and chief operating officer, and Brian Morrow, executive vice president and chief merchandising officer, will fill that office, reporting to chief executive officer Jay Stein.

Stein said in a news release that the promotions “are a testament to their leadership” as the company has produced seven consecutive quarters of comparable-store sales gains, or sales at stores open for more than one year.

Stein Mart has been generating a lot of cash as it increases sales, so its board of directors also last week approved an increase in the quarterly dividend from 5 cents a share to 7.5 cents.

“We are confident in the continuing improvement in our financial results and our generating more cash than we need for our investments in growth,” Stein said in a separate news release.

“Increasing our dividend is a great way to use our cash and increase shareholder value,” he said.

Earnings push Landstar stock higher

Landstar System Inc.’s stock reached a record high Thursday after the Jacksonville-based trucking company reported first-quarter earnings at the high end of its forecast and predicted a strong second quarter.

First quarter earnings were 61 cents a share, up from earnings from continuing operations of 55 cents in the first quarter of 2013 and at the top of Landstar’s forecast range of 55 cents to 61 cents.

Landstar also forecast second-quarter earnings of 73 cents to 78 cents a share, compared with 66 cents last year.

“I believe that the current operating environment greatly favors the Landstar model,” Chairman and CEO Henry Gerkens said in the company’s conference call with analysts.

“In addition, with our reconfigured field organization now in place and fully staffed, the concentrated coverage and additional boots-on-the-ground approach should provide additional revenue opportunities over the coming quarters,” he said.

After recording $688 million in revenue in the first quarter, Landstar is forecasting second-quarter revenue of $750 million to $800 million.

“Although we fell short of our $3 billion 2013 annual revenue goal, it certainly appears to be within our reach in 2014,” Gerkens said.

Landstar’s stock rose as much as $1.43 to $62.67 Thursday after the report.

Asbury knows Jacksonville market well

As Asbury Automotive Group Inc. last week announced its first-quarter earnings, the auto dealership company also formally announced its plan to open its first two standalone used car dealerships in Jacksonville and Tampa under the brand name “Q Auto.”

The Duluth, Ga.-based company operates 101 retail auto franchises in 18 markets, including the Coggin dealerships in the Jacksonville area. During Asbury’s conference call last week, one analyst asked why the company chose Jacksonville and Tampa for its first Q Auto locations.

“These are markets we know well. They are markets where we have a presence. They are markets where we do a very good job selling used cars,” CEO Craig Monaghan said.

Asbury’s familiarity with Jacksonville and Tampa is very precise, Monaghan said.

“We know the streets, we know the intersections, we know where cars sell well. We were able to identify facilities that we could get at what we feel were attractive price points, so we could get in here and give this thing a shot with a reasonable amount of investment. It’s not a whole lot more complicated than that,” he said.

Asbury filed building permits to build its Q Auto store at the company’s Coggin Toyota at the Avenues property at 10564 Philips Highway.

The Toyota dealership is moving to a new location at Philips Highway and the Interstate 295 East Beltway.

Monaghan said Asbury owns the Q Auto site. “It’s a Toyota store today and does quite well. The store is being relocated a few miles down the road,” he said.

The Tampa store is scheduled to open in June, and Asbury expects to open the Q Auto store in Jacksonville in the fall.

Monaghan said the company expects capital expenditures of up to $25 million related to the Q auto launch and that it will likely reduce 2014 earnings by 8 to 12 cents per share.

“We believe it will take a store approximately 18 months to achieve run rate revenues and profitability,” he said.

Asbury reported first-quarter earnings from continuing operations of $1.03 a share, up from 77 cents the previous year.

Total revenue rose 11 percent to $1.4 billion. Used-car sales revenue rose 14 percent, while new- vehicle revenue rose 9 percent.

Northrop CEO explains St. Augustine expansion

A week after Northrop Grumman Corp. formally dedicated its Aircraft Integration Center of Excellence in St. Augustine, an analyst asked CEO Wes Bush to explain the center of excellence rationale during the company’s quarterly conference call.

Northrop a year ago announced plans to establish five centers of excellence in its aerospace systems business, including St. Augustine. Bush said in last week’s call that the defense contractor sees a lot of opportunities in the aerospace sector.

“That set of opportunities is adequately robust to merit investment, to make sure that we’re doing the right things to be able to pursue those opportunities, as well as to execute on those that we’ve already captured,” he said.

He said Northrop is a company that was “built through acquisition,” and the centers of excellence will make its operations more efficient. The centers allow people working on similar projects to work more closely together, he said.

Northrop’s expansion project in St. Augustine is expected to add 400 jobs to the 1,000 employees it already has at the aerospace facility.

“Recruiting is an important part of our company, and I know sometimes it’s a little bit of an odd message for folks who think about our industry right now as perhaps shedding jobs and reducing footprint,” Bush said.

“Even though we’re down about 20 percent in headcount from our peak, we hired about 5,000 people last year, and we’re going to do about the same this year. So recruiting is a big part of our thought process,” he said.

Northrop reported first-quarter earnings of $2.63 a share, up from $2.03 the previous year. The results were helped by a tax benefit that added 23 cents a share to the earnings.

Operating income in the aerospace division rose by 20 percent to $324 million.

Northrop also increased its earnings forecast range for the full year to $8.90 to $9.15 a share, compared with its previous forecast of $8.70 to $9.

Gannett earnings helped by merger, Olympics

Gannett Co. Inc. last week reported adjusted first-quarter earnings rose by 10 cents a share to 47 cents, following an acquisition that nearly doubled its portfolio of television stations.

Gannett, which owns WTLV TV-12 and WJXX TV-25 in Jacksonville, increased its portfolio to 40 stations with the December acquisition of Belo Corp.

With the Belo stations added to the mix, Gannett basically doubled the revenue from its broadcast group in the first quarter to $382.3 million.

However, on a pro forma basis, if the Belo stations had been acquired a year earlier, Gannett said its broadcast revenue would have still risen by 19.6 percent, helped by increased advertising revenue from the Winter Olympics that were broadcast on 16 NBC stations owned by Gannett, including WTLV.

“Our broadcast group achieved exceptional ratings, particularly throughout the Sochi Winter Games as Gannett stations took the top two spots in prime time and in every Olympic day-part among major market NBC stations,” CEO Gracia Martore said in a news release.

Operating income from the broadcast division jumped 84.7 percent to $154.5 million, with the addition of Belo.

Meanwhile, Gannett’s publishing division saw a decline in revenue and earnings as the newspaper industry continues to struggle. Publishing revenue fell 3.3 percent to $842.1 million and operating earnings dropped 28.5 percent to $43 million.

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