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Cost Plus a Sell Down to $1
Cost Plus, Inc. (CPWM - Analyst Report) reported poor results for the second quarter. While sales were up 5.6% year-over-year, the company lost $25.2 million or $1.14 per share. Sales were in line with the consensus, but EPS missed by $0.17.
Cost Plus is in a tough spot and its business continues to deteriorate. We see no signs that the company will be able to right its ship in the near term. The macro headwinds including housing, credit markets, and food and energy prices are eroding the consumers’ purchasing power, which is hurting its results.
What’s more, the company’s losses are mounting and its balance sheet remains weak. This combination does not point to a higher stock price. We reiterate our Sell rating and reduce our target price from $2 to $1.
The management expects total net sales of $217-$228 million with same-store sales of -2% to +2% and a loss from continuing operations before interest and taxes of $19-$24 million. In January, the company announced plans to close 18 stores and reduce its corporate workforce by 10%.
The management indicated that the workforce reduction and the closure of underperforming stores are necessary to complete the turnaround in the midst of a challenging retail and economic climate. While we agree with the store closures and headcount reductions, we have to question the company opening new stores in the current retail environment.
Read the full analyst report on CPWM
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| Market Summary | Jul 31, 2010 13:08 pm ET |
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