Body Central Corp. last week said it is postponing a planned move to a new, larger headquarters and warehouse site in North Jacksonville until 2015 because of its continuing financial struggles.
However, its year-end financial report also raised questions about whether the company will even be around next year to move into that facility.
“We anticipate a mounting debate among investors surrounding longer-term viability of the brand and business,” Piper Jaffray & Co. analyst Stephanie Wissink said in a report on the company last week.
That doesn’t necessarily mean the company is going out of business, but it may not be around as an independent Jacksonville-based public company.
“It could become an interesting private equity candidate given how much needs to be fixed and its potential growth profile, which we believe should provide a base,” SunTrust Robinson Humphrey analyst Pamela Quintiliano said in her report.
Body Central’s stock price, which fell to about $1 last week, certainly makes it ripe for a buyout. That reduces its market capitalization to about $16 million, compared with about $500 million at its peak two years ago before sales started plummeting.
Body Central helped bring up the debate about its future itself in its news release last week with this statement: “The company has suffered losses and negative cash flows from operations that raise substantial doubt about our ability to continue as a going concern.”
Whenever you see the “going concern” language in a corporate document, you have to wonder if this is a real worry or a legal requirement.
In Body Central’s case, additional language in its subsequent annual report filed with the Securities and Exchange Commission last week indicated that management may be more confident and that the language was a legal requirement.
The annual report said financial issues “raise substantial doubt about our ability to continue as a going concern under applicable authoritative literature.”
Analysts definitely have questions about Body Central’s future.
“We have little confidence in turnaround prospects and see ongoing risk to liquidity and potential for further dilutive capitalization events,” Wissink said in her report.
“While efforts to stem declines through cost cuts have been only partially effective, we see a company that is increasingly handicapped in their ability to execute a turnaround with limited capital flexibility,” she said.
One interesting note in Body Central’s conference call with analysts last week was that the fashion retailer’s newly remodeled prototype store in Orange Park is doing quite well, but the company doesn’t have the money to make the capital expenditures to replicate the remodel at other stores in the chain.
“The company noted that the prototype has outperformed the overall comps (comparable-store sales) by roughly 18 points over the four-month period it has been open. It has also seen an increase in traffic and a more diverse customer base,” Quintiliano said in her report.
“However, while we are encouraged by its performance, the company does not have plans to ramp this store format this year due to its tempered capex projections. Instead it plans on improving signage and the presentation of floor sets in order to replicate the feel of the new format. While this might provide an incremental benefit, we are skeptical that it will provide significant upside,” she said.
Quintiliano also raised questions about whether the new management team brought in last year can turn Body Central around.
“All the people who were previously blamed for problems are gone, new management has been in place for 13 months, yet issues persist,” she said.
Shoe Carnival dealing with tough environment
Analysts noted that, in addition to its other problems, Body Central is trying to turn around in a difficult retailing environment that has been particularly tough because of the harsh winter weather in much of the country.
Shoe Carnival Inc. said weather has been impacting its sales. The footwear chain reported earnings of 3 cents a share for the fourth quarter ended Feb. 1, down from 13 cents the previous year.
Comparable-store sales (sales at stores open for more than one year) fell 2.5 percent.
The footwear chain projects first-quarter comp sales to be anywhere from flat to down 3.5 percent.
Sterne, Agee & Leach analyst Sam Poser said in a research note that sales are more likely to trend at the lower end of that range.
“Weather, investments, and perhaps some ceding of market share leave us planted in the audience,” said Poser, who maintains a “neutral” rating on Shoe Carnival’s stock.
“There are few trends driving women’s footwear, and athletic sales remain tough. Shoe Carnival is losing share to family footwear and moderate department stores which have more established e-commerce platforms,” he said.
However, Avondale Partners analyst Mark Montagna, who has a “market outperform” rating on the stock, thinks investors will give Shoe Carnival a pass on weak sales results because of the harsh weather.
“Shoe Carnival earns such a pass for being such a high credibility team. It should maintain its premium valuation with the fact it is at the earliest stages of its greatest store growth ever and likely its greatest era of comp consistency resulting from the national cable TV advertising,” Montagna said in his research note.
Former Jacksonville Jaguars owner Wayne Weaver is chairman and the largest shareholder of Shoe Carnival, controlling 24.4 percent of the stock with his wife, Delores.
Analyst upgrades EverBank
EverBank Financial Corp.’s stock reached the $20 level two weeks ago, double its May 2012 initial public offering price of $10, and at least one analyst thinks it’s going higher.
Sterne, Agee analyst Peyton Green last week upgraded the Jacksonville-based bank from “neutral” to “buy” and set a price target of $23.25 for the stock.
“We believe that better than expected net interest income growth and expense management will result in stronger than consensus EPS in 2015,” Green said in his research report.
CSX heads to Boston for annual meeting
CSX Corp. has scheduled its annual shareholders meeting for Boston on May 7, according to its proxy statement filed last week.
The Jacksonville-based railroad moves its annual meeting around from year-to-year to different cities in its system, which covers much of the Eastern U.S. It last met in Jacksonville in 2004.
CSX’s stock is widely held with few large investors. According to the proxy, the only entity owning more than 5 percent of the company’s stock is Capital Research Global Investors of Los Angeles, which owns 87.7 million shares, or 8.7 percent of the stock.
The proxy also revealed that Chairman, President and CEO Michael Ward’s compensation package rose by more than 50 percent last year to $12.4 million. That was helped by a more than 50 percent increase in stock awards tied to long-term performance. That stock was valued at $9.2 million.
Ward’s cash incentive payments for 2013 more than doubled to $2 million.
Flowers moving slowly on Hostess bakeries
It doesn’t look very promising for the former Hostess Brands Inc. bread bakery in Jacksonville, which was closed in November 2012 and acquired by Flowers Foods Inc. in a bankruptcy court auction last year.
Thomasville, Ga.-based Flowers acquired a total of 20 Hostess bakeries and its bread brands but it hasn’t been in any hurry to reopen those bakeries, which were shut down when Hostess went out of business.
Flowers reopened the first of the Hostess bakeries in Nevada last year and plans to open a second in Knoxville, Tenn., sometime in the spring. Company officials told investors at Flowers’ analyst day meeting last week that it will be reopening other Hostess bakeries on a limited basis.
According to presentation materials on Flowers’ web site, the company said it will reopen two to three additional bakeries in the 2015-16 period and two to three more in 2017 and 2018.
It also said nine of the Hostess bakeries are currently offered for sale, but it didn’t specify which ones.
The Jacksonville location is a likely candidate for sale, since Flowers already operates its own bread and bun bakery in Jacksonville. The Jacksonville bakery employed 128 when it was shut down.
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