Elie Rosenberg is a value investor based out of Dallas, Texas. He is the founder and editor of valueslant.com, a site dedicated to value investing research and analysis.
Christopher & Banks (CBK), which I profiled here, reported first quarter earnings yesterday. They had guided for a terrible quarter, and produced a less than terrible quarter. That is a positive sign for a company and stock this depressed, and the market reaction today seems to agree.
Many of the most well-known hedge fund managers in the world engage in philanthropy, and in doing so, they often reveal their favorite hedge funds through a review of their foundation's public filings. Bill Ackman's Pershing Square Foundation invested in several hedge funds during the fiscal years that ended in September 2019 and September 2020.
Same store sales were down 2% (vs. guidance of a mid single digit drop) and gross margins came in at 34.7% compared to guidance of 32-33%. This produced earnings per share of $.05 versus analyst estimates of $-.06 (CBK was also helped by a tax benefit in the quarter). The results are certainly not overwhelming on an absolute basis, but they look good in light of what competitors like Talbots and Coldwater Creek have done lately.
CBK remained cash from operations positive, although they burned about $2 million in cash due to a $3.5 million capex spend on new store openings. I still don’t understand why they are being quite so aggressive on the new store openings this year (opening 31 new stores and closing 35 stores), but management says the new stores with the new formats are performing well.
Most notably, some product from the new design team was delivered to stores in May to a strong response. Sell through was 2-3X as fast as previous collections at a 20% higher price point. The turnaround hinges on the new design approach, and so far so good on that front.
For next quarter, CBK guided for same store sales to be flat to up slightly, which is encouraging given that Q2 last year was a decent quarter. However, they are guiding for gross margins to decline to the low 30s as they want to be sure to clear out old inventory for the full roll out of the new designs in Q3. They also guided for SG&A to be up slightly due to increasing store hours and marketing spend. The guidance appears to amount to about a break even quarter on an EPS basis.
The trend at CBK is certainly upwards and the thesis is starting to play out, but we won’t know all that much until Q3 when the product on the shelves more fully reflects the new design approach. In the meantime, it is nice to see the stock finally get a bump.
Disclosure: I own shares of CBK.