Jacksonville’s two publicly traded fashion retailers both disappointed investors on Thursday, one for past performance and the other for future projections.
Stein Mart Inc. reported adjusted fourth-quarter earnings of 15 cents a share, 10 cents lower than the fourth quarter of fiscal 2010 and 4 cents below the average forecast of analysts surveyed by Thomson Financial.
Meanwhile, Body Central Corp.’s fourth quarter earnings of 38 cents a share were 20 cents higher than last year and a penny higher than the average analysts’ forecast.
But the company also projected first-quarter earnings of 34 cents to 36 cents a share, below the average analysts’ forecast of 39 cents.
Stein Mart is in a transitional phase after the retirement of CEO David Stovall in September. Chairman Jay Stein, who has taken over as interim CEO while the company undergoes an extensive search for a replacement, thought that the company had been relying too much on coupons to draw in customers.
He announced in November that Stein Mart would shift its focus to offering everyday low prices.
“We continue to work on finding the right promotional balance,” Stein said in Thursday’s conference call with analysts, adding that coupon use was reduced by 20 percent in the fourth quarter.
“It (coupons) got so out of hand we had to rein it back in,” he said. So the company is returning to “the low-price strategy that the company was built on.”
Stein Mart’s stock fell 57 cents to $6.41 Thursday after the earnings report, an 8.2 percent drop that was the fourth biggest among all Nasdaq-listed stocks.
SunTrust Robinson Humphrey analyst Robin Murchison said in a research note that she is maintaining a “neutral” rating on the stock.
“The new strategy, limited growth opportunities, and the highly competitive environment combined with Stein Mart’s already lean expense structure should result in further margin pressure and hence, a lack of EPS growth,” she said.
During the conference call, Stein said the company is continuing its CEO search process. But he gave no indication of when a new chief executive will be named. Stein said last fall that it could take until midyear.
Analysts still like Body Central
Body Central’s stock opened $2.20 lower at $26.50 Friday morning after its late Thursday earnings report. But despite the disappointing forecast for the first quarter, analysts remain positive on the stock.
“Management indicated that the company underestimated demand for one lifestyle category (which was waning in the fourth quarter but began to ramp again in the first), leaving the company chasing demand in the first quarter and falling short of inventory,” William Blair & Co. analyst Sharon Zackfia said in a research note.
“Encouragingly, the unspecified category has short lead times and stores have already begun to receive more inventory, which is bolstering sales,” she said.
“While we understand investors will likely worry about the current quarter’s sales trends, we would be buyers of Body Central’s stock on weakness, as the company’s normally cautious management team seemed confident that the category fix was already in place,” Zackfia said.
Jefferies & Co. Randall Konik analyst had a similar outlook after Friday’s stock drop.
“We recommend this as a buying opportunity given that the long-term story is still intact, fundamentals are strong and Body Central has an attractive market position (fashion plus value) that gives it a competitive advantage in the retail landscape,” Konik said in his report.
Coach jumps on ‘excellent’ quarter
Another fashion company jumped to record highs Thursday after some positive comments from its chief executive at an investor conference.
Coach Inc. CEO Lew Frankfort said the company is in the midst of an “excellent” quarter, according to news reports. He also touted Coach’s prospects for sales in China.
The handbag and fashion accessories company, which has a major distribution center in Jacksonville, rose as much as $4.83 to $78.22 Thursday after the conference.
St. Joe rises after new CFO announcement
The St. Joe Co. stock rose $1.31 to $17.63 Thursday after the company announced the hiring of a new chief financial officer.
Thomas Hoyer, formerly CFO of eDiets.com Inc., will take over as CFO on March 19, St. Joe said.
So why did investors react to this announcement? Maybe it’s a bit of a reach, but here’s a plausible explanation in a report by research firm Morningstar Inc.:
“Some investors may be looking favorably on the hire, given that a couple of Hoyer’s past CFO positions were followed by some sort of corporate transaction. We have no insight into this possible perception, but do note that Hoyer was CFO at NationsRent before it was sold to Sunbelt Rentals in 2006, then CFO of Digital Angel until shortly before Applied Digital Solutions purchased all of the remaining stock it didn’t already own in 2007,” Morningstar said.
Fortegra beats forecasts in fourth quarter
Fortegra Financial Corp. reported fourth-quarter adjusted earnings of 27 cents a share, just a penny higher than last year. But the Jacksonville-based insurance services firm’s earnings were 6 cents higher than the average forecast of analysts surveyed by Thomson.
“Fortegra’s fourth-quarter results built on the momentum created in the third quarter, after an expense-related misstep in the second quarter,” SunTrust Robinson Humphrey analyst Mark Hughes said in a research note.
“Upside was driven by higher-than-expected revenue growth in payment protection and significant margin improvement year-over-year in both the payment protection and brokerage segments,” William Blair & Co. analyst Adam Klauber said in his report.
The earnings report had little impact on Fortegra’s stock, which has been stuck around the $7 level recently and hasn’t moved much this year. The stock continues to trade below Fortegra’s December 2010 initial public offering price of $11.
Both analysts say the stock is undervalued, based on their earnings projections.
“We anticipate that Fortegra’s valuation should migrate upward as the company builds a track record of growth and profitability,” said Hughes, who has a “buy” rating on the stock.
But Klauber is a little more cautious.
“We are reaffirming our ‘market perform’ rating, as the company needs to demonstrate several quarters of earnings progress before we become more comfortable with the growth story at Fortegra. While top-line growth remains a positive for the company and margins are slowly returning to historical levels, we believe consistency is crucial for this stock to perform,” he said.
Agencies raise FIS ratings
Two ratings agencies last week announced they were upgrading Jacksonville-based Fidelity National Information Services Inc., or FIS.
Standard & Poor’s Ratings Services raised its rating from BB to BB-plus, and Fitch Ratings increased FIS from BB-plus to BBB-minus (the more Bs, the better the rating).
“The upgrade reflects FIS’ strong and consistent operating performance and improved leverage profile,” S&P credit analyst Martha Toll-Reed said in a news release.
“In addition, the company has indicated that its strategic focus is shifting to organic growth with more modest, product-specific acquisitions, which should enable the company to continue to reduce leverage over the near-to-intermediate term,” S&P said.
Fitch said that the possibility of a leveraged recapitalization or leveraged buyout is the biggest risk to the credit rating.
“However, a more conservative approach to capital allocation from management and recent significant increase in the dividend rate, Fitch believes, reduces the probability of such an event,” it said.
“While higher dividends are not generally considered credit friendly, Fitch believes that for FIS, this should reduce some activist shareholder pressure in the future,” it said.
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