In a week of overwhelmingly bad news for fashion retailers, Stein Mart Inc. was a bright spot with a strong holiday season sales report.
Jacksonville-based Stein Mart said total sales for the five weeks ended Jan. 3 rose 7.9 percent to $189.5 million, while comparable-store sales jumped 5.8 percent.
Comparable-store sales are sales at stores open for more than one year and are considered the key metric for evaluating retailers. Stein Mart operated 270 stores at the end of the year, compared with 264 at the end of 2013.
Avondale Partners analyst Mark Montagna called Stein Mart’s sales “incredibly strong,” as they were well above his forecast of a 3.5 percent comparable-store sales increase.
“This sets Stein Mart up well for first quarter high-margin selling,” Montagna said in a research note.
He thinks shareholders could see a tangible benefit from the company’s strong sales.
“Cash accumulates and I have to think they do a special dividend of 50 cents at some point. I’d also expect them to raise the annual dividend from its current 30 cents,” he said.
Stein Mart has a history of special dividend payments to shareholders, including a $1-per-share payment in 2012 and a 50-cent payment in 2010, when it wasn’t paying quarterly dividends. It resumed quarterly dividend payments in mid-2013.
In a week filled with bad news for fashion retailers, particularly for Body Central Corp., it’s good to see one Jacksonville-based company doing well.
Coach buying Stuart Weitzman
Speaking of women’s fashion retailers, Coach Inc. made a bold move last week by announcing an agreement to buy luxury footwear company, Stuart Weitzman Holdings LLC.
It’s a bold move for Coach because this is the first acquisition for the handbag and accessories company.
Coach agreed to pay at least $530 million to buy Stuart Weitzman, which generated sales of about $300 million in the fiscal year ended Sept. 30.
The deal was met with a lukewarm reception on Wall Street, with Coach’s stock falling by 43 cents to $36.30 Tuesday after announcing the deal.
“Under normal circumstances, a leading American handbag brand acquiring a leading American footwear brand would be a reasonable strategy, but Coach may have too many balls in the air right now,” Sterne, Agee & Leach analyst Ike Boruchow said in a research note.
Coach has been struggling to rebuild its brand, with North American comparable-store sales dropping by 24 percent in the first quarter ended Sept. 27. Analysts expressed concern that a major acquisition could distract management from its efforts to build back its own sales.
Coach is leaving the management team of the footwear company intact to run that business, including Executive Chairman Stuart Weitzman.
Coach’s North American distribution center is located at the Jacksonville International Tradeport in North Jacksonville, but the acquisition will apparently not increase activity there.
“We don’t have plans to use our Jacksonville distribution center to handle Stuart Weitzman products at this time,” Coach spokeswoman Andrea Shaw Resnick said by email.
Scribe makes General Employment profitable
Although General Employment Enterprises Inc. has lost money for the last three years, it would have recorded an operating profit in fiscal 2014 if it had owned Scribe Solutions Inc. for that full year, the company said last week.
General Employment last month agreed to acquire Jacksonville-based Scribe Solutions. As part of that deal, Scribe Solutions CEO Derek Dewan will become CEO of the merged staffing company.
An information statement filed with the Securities and Exchange Commission by General Employment showed that privately owned Scribe Solutions had revenue of $3.7 million and net income of $128,000 for the fiscal year that ended Sept. 30.
Combined, the two companies would have produced total revenue of $43.5 million and operating income of $57,000 for the fiscal year, General Employment said. However, after interest expenses, General Employment would have still ended the year with a net loss from continuing operations of $427,000.
General Employment’s current CEO, Andrew Norstrud, said in a news release last week that he expects a turnaround in the company’s business this year.
“With strong gross margins and the expectation of general and administrative expenses continuing to decrease, the 2015 fiscal year has great potential to be a breakout year for the company,” he said.
Norstrud will return to the role of chief financial officer once the merger is completed and Dewan takes over as CEO.
“I am looking forward to working with Derek as we enter 2015. His staffing industry expertise and business acumen will assist our company to significantly accelerate the implementation of our internal and acquisition growth strategy and help us in the execution of our plan to achieve improved profitability,” Norstrud said.
General Employment is currently headquartered in Naperville, Ill. The company has not said if it will move its headquarters after the merger.
Analysts praises Fidelity’s Black Knight
Fidelity National Financial Inc. closed out 2014 with plans for an initial public offering of its Black Knight Financial Services subsidiary, and one analyst thinks that could raise the value of Fidelity’s stock.
“We believe FNF’s proposed spin of Black Knight will produce a new investment opportunity and one of only a handful of ways to play housing tech,” Stephens Inc. analyst John Campbell said in a research note as he raised his rating on Fidelity from “equal weight” to “overweight.”
“Simply put, in Black Knight we see scarcity value, improving fundamentals with a clear path to larger market share and higher margins and an unmatched expertise in serving the life cycle of loans for banks/originators of all sizes, and thus we believe Black Knight is worthy of a premium-type multiple,” Campbell said.
Black Knight consists of operations formerly performed by Lender Processing Services Inc., which Fidelity reacquired a year ago. The company provides technology and analytics services for mortgage lenders.
Fidelity plans to retain a majority voting interest in Black Knight after the IPO.
Campbell said Fidelity has improved the way Black Knight handles product development over the past year.
“In our view, LPS’s product development was less favorable in that the company would typically build and then find buyers. The Black Knight product development takes the opposite approach in that the company works directly with clients (often times partnering or engaging in joint ventures), determines what should be built, builds it internally and then sells it across its client base,” he said.
Campbell raised his price target for Fidelity’s stock from $31 to $43, based on the value of Black Knight and on Fidelity’s main business, title insurance.
“We think FNF is worthy of a premium multiple given our belief that the company is the best operator” in the title insurance field, he said.
Analyst downgrades CSX
Another earnings season begins this week with CSX Corp. scheduled to report its fourth-quarter numbers on Tuesday, but before the report, UBS Securities analyst Thomas Wadewitz last week downgraded the Jacksonville-based railroad company from “buy” to “neutral.”
Wadewitz said in a research note that the downgrade is “due to our concern that 2015 may be another year of muted EPS growth.”
A sharp decline in natural gas prices will continue to impact demand for coal shipments on the railroad and falling oil prices could also affect CSX, he said.
“While the sharp decline in oil price is not a big issue for much of CSX’s business, we believe it is a material headwind to both growth and profitability in its intermodal business,” he said.
“We now believe that the mix of positives and negatives for CSX is balanced and as a result we rate CSX neutral.”
Upgrade sends Regency to seven-year high
Regency Centers Corp.’s stock last week reached its highest level in almost seven years after Raymond James analysts upgraded the Jacksonville-based shopping center developer.
The analysts upgraded Regency from “market perform” to “outperform” as part of an overall reassessment of a number of real estate investment trust stocks.
“We believe the company’s recycling and repositioning efforts over the last several years have created a high-quality portfolio that will continue to deliver strong earnings growth and above-average same-store net operating income growth in 2015,” they said.
“Through portfolio upgrades and prudent asset management, Regency Centers has shown an ability to create value, as consensus NAV (net asset value) estimates have grown an average 12 percent per year over the last five years. We expect that NAV growth to continue, driving Regency shares higher,” they said.
The Raymond James analysts set a $71 price target for the stock.
Regency’s shares rose as much as $2.01 to $68.02 Wednesday after the upgrade and reached as high as $68.15 on Thursday, its highest level since early 2008.
Regency was the best performing stock among larger Jacksonville-based companies last year, producing a total return of 42 percent.
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