Christopher & Banks a Possible Value Play at 11 PE as SSS Turns Around

Christopher & Banks Corporation (CBK)

Introduction:

Christopher & Banks Corporation (NYSE:CBK) was founded in 1956 and is headquartered in Plymouth, Minnesota. The company was formerly known as Braun’s Fashions Corporation, and changed its name to Christopher & Banks Corporation in July 2000. The Company is a specialty retailer of women’s clothing providing exclusive fashions under the Christopher & Banks label. The Company has stores operating primarily in the northern regions throughout the United States. As of January 28, 2012, the company operated 686 stores in 44 states, including 402 Christopher & Banks stores; 199 C.J. Banks stores; 62 dual-concept stores; and 23 outlet stores.

Stock Snapshot:

As of Oct 17’ 2012, the stock for Christopher & Banks Corporation (NYSE:CBK) closed at USD 3.71 representing a market capitalization of USD 137.7 million. The stock has achieved an average volume of 288,368 shares over the last three months and has traded between a range of USD 1.01 to USD 3.88 over the last year. The stock has been trading at a P/S ratio of 0.31 and a P/B ratio of 1.86.

Competitor Analysis:

New York & Company, Inc., together with its subsidiaries, operates as a specialty retailer of women’s fashion apparel and accessories in the United States. It provides wear-to-work and casual apparel and accessories, including pants, dresses, jackets, knit tops, blouses, sweaters, denim, T-shirts, activewear, handbags, and jewelry. As of Oct 17’ 2012, the stock has been trading at USD 3.56 with a total market capitalization of USD 217.49 million. The stock has been trading at a P/S ratio of 0.23 and a P/B ratio of 2.24.

Danier Leather, Inc. (TSE:DL) is a leading designer, manufacturer, and a vertically integrated retailer of high-quality fashion leather and suede clothing and accessories for women, men and children. The group’s merchandise is marketed exclusively under the Danier Leather, Inc. (TSE:DL) brand name and is available only at its 75 shopping mall, street-front, and power center locations and on its on-line website. The stock has been trading at CAD 11.3 at a P/E ratio of 13.14, a P/S ratio of 0.35, and a P/B ratio of 0.8.

Financial Analysis:

Revenue:

For 6MFY12, the total net sales were recorded at USD 197.1 million as compared to USD 216.0 million for the corresponding period last year; representing a YoY decrease of 10.4% The major factors contributing to the overall decline in sales were the 4.9% decrease in same stores sales, combined with a 13% YoY decline in stores operated during the period. However, based on the results of the most recent quarter, the Company has started to stem the decline in its same store sales !

Merchandise, Buying and Occupancy Costs:

During 6MFY12, merchandise, buying, and occupancy costs, exclusive of depreciation and amortization, were recorded at USD 146.7 million (representing 74.5% of net sales), as compared to USD 149.2 million, (or 67.8% of net sales) during the corresponding period last year. This resulted in an approximate 670 basis point decrease in the Company’s gross profit margin during 6MFY12, as compared to 6MFY11, mainly driven by the decline in the company’s merchandising margins.

Earnings Analysis:

For 6MFY12 the Company recorded a net loss of USD 15.6 million (representing 7.9% of net sales ) and USD 0.44 per diluted share, compared to a net loss of USD 11.1 million (representing 5.0% of net sales) and USD 0.31 per diluted share for the corresponding period last year.

Factors to Watch Out:

Started to turn around its declining same-store sales (SSS) under current management, according to the performance of the most recent quarter. The turnaround could be quick!