Cost Plus Downside Risk Remains

Cost Plus, Inc. (CPWM - Analyst Report) is a leading specialty retailer of home furnishings. As expected, the company reported disappointing results for the third quarter. The company’s sales trends have been weak for some time, and the current macro economic headwinds are not helping the company’s prospects. We estimate that Cost Plus will have losses for the next few years.

Mall traffic suffered a severe decline in September, and those trends should continue throughout the holiday shopping season. This will further pressure the company’s sales and profit margins. What’s more, losses are mounting, and its balance sheet remains weak. This combination does not point to a higher stock price. We reiterate our Sell rating. We think the stock has downside risk to $0.50, which represents about 0.1x book value.

Read the full analyst report on CPWM

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