I'm not quite sure what you say at this point about this company or its stock. Oh, I know, can someone get a tourniquet so that we can stop the bleeding?!
I thought Q4 for retail was supposed to be a quarter for recovery; a quarter where a company can finally go into the black and show the positive effect of all of the hard work they have done for the year. This was not the case for Hastings.
Net profits were DOWN 321% for the quarter, and 1,135% for the year! Even if you took out the abandoned lease fees, that would still put net profits DOWN 258% for the quarter and 994% for the year!
Merch revenues did start to recover slightly for the quarter, but were still down, as well as being down YTD.
Rental revenues got even worse during Q4, down even further than the 15% I expected, to DOWN 17.76%, putting them down 12.22% for the year.
While profit margins on merch and rental were better for the quarter, they still lost ground for the year.
Still, the biggest drain on the company is their SG&A expenses. They have yet to get these in line with where they need to be. Even without abandoned lease fees, in Q4, they still spent $48.1 MM vs. $48.4MM in the same period last year. Yes, they did decrease it on a dollar spend level, but by only 0.62%. On a percentage basis, they increased the spend in this area by 126 basis points, 31.42% vs. 30.16%. In order to stay even with the decline in revenue they needed to cut the dollars spent on this expense 4.6 - 4.8%.
For the year, it was also very similar to Q4, decreased the dollar spend by 0.76%. But on a percentage basis, they increased the spend in this area by 146 basis points, 36.80% vs. 35.34%. In order to stay even with the decline in revenue they needed to cut the dollars spent on this expense 4.8 - 5.0%.
I know some investors will want to show the positives of this company. They will do this by talking about the company's book value per share.
Even on that front they are losing ground. In one quarter, from the end of Q3 to the end of Q4, they lost almost a $1 per share in book value.
For fiscal 2011, the stock LOST $1.17 per share in book value, and that was with 770K shares being bought back by the company. If those shares were still out there, the loss of book value per share would have been $2.00 per share!
The loss in shareholder equity from 2009 to 2010 was not good, but was a modest $3.432 MM. The loss in shareholder equity from 2010 to 2011 was catastrophic at $18.668 MM! Almost 18% of the equity of the company was erased from 2010 to 2011.
Other supporters will want to talk about the strength of goHastings.com, the fact that they sell used merchandise, that they sell en e-reader and have an e-reader app available, that they are in small markets, and how busy their stores appear to be.
The problem for all of those supporters is the fact that all of the factors I listed are baked into the numbers we are seeing on this, and on all other, earnings releases. You can try to tell people all you want, how much these things matter. But, up to this point, they have not mattered enough to bring any recovery to Hastings.
One of the big problems from the release is the fact that we received the same excuses for the downturn, that we have heard for at least 14 quarters: 1) Weak release slate, 2) Digital delivery, 3) Rental migration to kiosks and subscription, and 4) Smaller average purchases.
Give us something new! Tell us something different! All this tells me is, they don't have any answers. It's all out of their control, and everything will get better if the economy gets better.
Which isn't the case, because the economy has gotten slightly better, and their sales and financials are worse. While many of their competitors released positive Q4 and fiscal 2011 earnings releases.
They gave no concrete guidance for 2012, which is concerning, and shows that they don't know which direction this company is headed.
Yes, they did say they would roll out a lifestyles products and tablets expansion, and decrease the footprint of rental. Are they doing something, yes. Which I will applaud them on.
But, the challenge is that they will not a get a 1 for 1 profit and revenue tradeoff for the space they take from rental. Also, they are only doing this in 55 of their 139 stores. So that still leaves the other 60% of their stores vulnerable to the continued downturn in rental.
One key statement they made about this expansion is this, "I am confident that with the business strategies discussed above, along with an improvement in current economic conditions, we will return to profitability and grow our business over the years to come."
They still gave themselves an out, by saying economic conditions have to improve. So, in other words, "If gas prices continue to go up, the economy doesn't get any better, and discretionary spending goes down, all of this will be for nothing, and we'll be right back where we started."
All in all, disappointing to say the least. It's a good thing for John Marmaduke that he and his family own most of the shares. Otherwise, if he were a normal CEO, I don't know how he would be keeping his job.
Horrible. I don't think there can be any positive spin looking backwards. So bad, in so many ways. Even the things that got better (margin rate, payroll SGA) ended up masked in the results. So now, you have to maintain those good things, even to maintain the horrible status q.
My opinions on why this management team is so bad is evident in the release. I think it was great that they called out a sensible approach to replace rental revenue. However, they should have done that 3 years ago, as part of a forward looking vision. They didn't. They focused their attention on blaming weak releases, denying their would be a digital/kiosk/mail impact, and saying they'd pick up share from other brick stores as they went out. Great, but they never reacted - they just waited. And so now even with this initiative, even if it delivers, it still just maintains their current state. (They'll decline another 10-15M in revenue this year, to be hopefully replaced with lifestyle). So you end up right back here - with losses. It is just too late. They needed to be on that 3 years ago. (And you can't say they didn't know, because you can see the comments on this message board 3 year ago on the same topic)
Notice there is nothing dealing with books and movies. So where is the attention to where those sales will be in 24 months?
In addition, what is with SGA? How can that rate be so high! The fact that this was on their goals in the 2011 annual report, and they couldn't control it, makes me think this is as low as it can go. Every loss in margin, right to the bottom line.
I don't think you can just ignore the lease abandon. That is likely to occur annually as they shrink. Don't think of it as one time (like the tax). Thus, they actually had negative income in Q4. If you can't turn a profit in Q4, you have big problems. HAST has many years where it is negative through Q3, and rides Q4.
Capital expense. They are chopping. They were already underfunding their remodels. That is a nasty hidden liability that will come due in the long run.
... All in, it is a loss. While they clearly shared the vision (which is not good), nothing in it suggested -improvement-, just a decrease in the rate of decline.
"20cents on the dollar". Makes no sense. It is like saying you can get 20% interest if you loan money to someone from Africa. If they don't pay you back, are you really getting the return?
.. Can't wait to see the exec comp in the annual report. I bet the leadership team all saw increases in their bases.