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Basch Report
Jax Daily Record Thursday, Sep. 6, 201805:10 AM EST

The Basch Report: American Outdoor has best day in years

Company that’s closing its Jacksonville facility sees its stock surge 43.6 percent in one day.
by: Mark Basch Contributing Writer

As American Outdoor Brands Corp. prepares to close its Jacksonville facility, its stock had its best day in years Friday.

The company which makes Smith & Wesson firearms and other outdoor products reported adjusted earnings of 21 cents a share for its first quarter ended July 31.

That was up from 2 cents a year ago and was 9 cents higher than the average forecast of analysts, according to Zacks Investment Research.

The earnings surprise sent American Outdoor’s stock up by $4.26 to $14.03 Friday, a 43.6 percent rise that was its best one-day gain since November 2000, according to investing website MarketWatch.

American Outdoor last month said it is closing its Jacksonville facility with 50 employees, which it acquired when it bought outdoor gear company Ultimate Survival Technologies in 2016.

During its conference call with analysts last week, company officials said the closing of the former UST building in Jacksonville is part of a plan to consolidate operations into a new logistics and customer service center in Missouri.

The Springfield, Massachusetts-based company developed the Missouri facility as “a strategic initiative that will ultimately allow us to lower our costs and better serve our customers,” CEO James Denby said.

“We are investing substantial resources into this new facility and its systems are an evolutionary step toward improving our efficiency, speeding up our integration of future acquisitions and achieving our long-term strategy to better serve our wholesalers, retailers and consumers,” he said.

Chief Financial Officer Jeff Buchanan said the company would have closed its Jacksonville operations sooner if the Missouri facility already had been in place.

“Just take UST. Bought in 2016, not going to be integrated until 2020. If we had the Missouri facility then, we could have done that in three months because it’s not that complicated,” he said.

American Outdoors is planning to close the 100,625-square-foot facility at 7720 Philips Highway in about eight months.

UST was an 80-year-old family-owned Jacksonville-based company that produced survival and camping equipment before the $32.3 million buyout. American Outdoor acquired it as part of its strategy to expand its business beyond the firearms market.

The parent company changed its name from Smith & Wesson to American Outdoor Brands at about the same time of the UST deal to reflect the diversification strategy.

About 25 percent of the company’s $138.8 million in first-quarter revenue came from its outdoors business. Firearms sales were basically flat in the quarter, but sales from the outdoors division rose 12 percent.

Shoe Carnival rolls to record highs

Another stock benefiting from strong earnings last week was Shoe Carnival Inc., which reached record highs after reporting results well above analysts’ forecasts.

The chain of footwear stores controlled by former Jacksonville Jaguars owner Wayne Weaver reported earnings of 76 cents a share for the second quarter ended Aug. 4, tripling the results from last year’s second quarter and beating the average forecast by 19 cents, according to Zacks.

Total sales in the quarter rose 14.2 percent to $268.4 million and comparable-store sales (sales at stores open for more than one year) rose 6.7 percent.

“Our mid-single digit comparable store sales increase was primarily driven by a double-digit increase in women’s non-athletic footwear with most of our other major footwear categories up mid-single digits. This positive trend has accelerated into the back-to-school season with comparable store sales up 7.7 percent through the first three weeks of August,” CEO Cliff Sifford said in a news release.

“We believe we remain well positioned for future growth and based on these strong operational and financial results, as well as our outlook for the remainder of the year, we are raising our annual earnings guidance,” he said.

Evansville, Indiana-based Shoe Carnival, which operates 402 stores in 35 states and Puerto Rico, is projecting earnings of $2.07 to $2.15 for this fiscal year, compared with its previous forecast of $1.90 to $2.05.

The company had adjusted earnings of $1.49 a share in fiscal 2017.

Shoe Carnival’s stock jumped by $4.83 to $41.74 on Aug. 29 after the earnings report and continued climbing the rest of the week, reaching a high of $45 on Friday.

Weaver is chairman of Shoe Carnival and his family is the company’s largest shareholder, controlling about 31 percent of the stock.

Analyst upgrades Regency Centers

Positive earnings reports from retailers like Shoe Carnival bode well for mall operators, prompting one analyst to raise his rating last week on  Jacksonville-based Regency Centers Corp.

“We think clear signs of a retail recovery have fueled the rally in Strip REITs in recent weeks, particularly following second-quarter results that were ahead of consensus on average,” Deutsche Bank analyst Derek Johnston wrote in a research report.

Johnston said stocks of real estate investment trusts that operate strip shopping centers, like Regency, have risen almost 15 percent as a group over the last three months.

“During the run we saw relative outperformance of the lower-quality names and are proactively rotating into higher-quality portfolios, which we think will outperform through the business cycle and as the retail landscape continues to evolve and densify,” he said.

That prompted him to raise his rating on Regency from “hold” to “buy.”

He said the upgrade reflects Regency’s “attractive” valuation. The stock has been trading in the mid-$60s recently, and Johnston’s price target is $72.

“We also expect Regency to continue to produce above trend internal growth, given the quality of its portfolio, supplemented by the best-in-class development platform,” he said.

Regency’s stock price has been hurt by recent sales of shares by Gazit-Globe Ltd., which had been its largest shareholder, Johnston said.

Gazit-Globe was issued its shares when Regency bought Equity One Inc. last year, and the firm has been unwinding its position in Regency.

“The completion of the divestiture late last month eliminates a meaningful overhang from the stock and we think represents a good entry point,” Johnston said.

Cannabis product company grows revenue

Jacksonville-based mCig Inc., which operates a number of businesses serving the legal cannabis markets, reported a big increase in sales in its last fiscal year.

Revenue grew 48 percent to $7.1 million in the fiscal year ended April 30, mCig said last week.

The company had a net loss of $1.08 million for the year, including one-time charges.

Revenue included $3.7 million from mCig’s construction division, which provides consulting for businesses looking to build cannabis grow facilities, and $2 million from retail sales.

The other $1.4 million in revenue came from its technology and media sales division called Obitx, which mCig is planning to spin off as a separate public company.

Obitx has filed a registration statement with the Securities and Exchange Commission for the spinoff, which describes the company as a marketing and advertising business.

In the spinoff, Obitx shares will be distributed to mCig stockholders.

“With the S-1 approval of our subsidiary, Obitx, expected any day, and the upcoming harvest of our first hemp crop at NYAcres, we are very optimistic that the upcoming year will add increasing value for our shareholders,” mCig CEO Paul Rosenberg said last week in a news release.

NYAcres is a joint venture producing hemp at a farm in upstate New York.

The company’s annual report said mCig employs 73 people at its businesses, including part-time workers and consultants.

The company’s stock trades on the OTC market under the ticker “MCIG,” and it expects Obitx to also trade on the OTC market.


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