I hope Onepoint is right here and you get a chance to get out without too much loss.
I think the problem is right here, from the last quarterly statement:
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $10.1 million, or 70.2%, to $24.5 million for the three months ended March 31, 2012 from $14.4 million for the three months ended March 31, 2011. The increase was primarily the result of $4.1 million in additional payroll-related expenses, $1.8 million in additional marketing and advertising expenses and $1.0 million in additional depreciation and amortization based on increased investments in property and equipment and the acquisition of certain intangible assets in August 2011. We continue to make critical investments in the business to support long-term growth. These investments include additional personnel in key areas of our business, product development, point-of-sale merchandising, international expansion and development of our gaming platform. Legal expenses increased $0.9 million primarily due to $0.7 million of legal expenses related to a lawsuit with Monster Cable Products, Inc., or Monster, that was settled on February 15, 2012. No further expenses related to the Monster lawsuit will be incurred in subsequent periods. As a percentage of net sales, selling, general and administrative expenses increased 6.0 percentage points to 46.0% for the three months ended March 31, 2012 from 40.0% for the three months ended March 31, 2011.
ESPECIALLY right HERE:
Income from Operations
As a result of the factors above, income from operations decreased $2.4 million, or 62.1%, to $1.5 million for the three months ended March 31, 2012 from $3.9 million for the three months ended March 31, 2011. Income from operations as a percentage of net sales decreased 8.1 percentage points to 2.8% for the three months ended March 31, 2012 from 10.9% for the three months ended March 31, 2011.
Yes the brand is selling, but it is spending a lot of money to sell and build brand. People want to see SKUL stop spending money to build the brand, and more SKUL USING the brand to earn money.
There were two main issues:
1) Obsolete inventory. The discussion around some old inventory that was sold in Q1 at a very low gross margin was troubling. There was no impairment taken against the inventory and even though it was sold for more than cost it sounded less than conservative on the call.
2) Gross margin degradation. Changing product mix didn't allow for higher overall sales to translate into increased gross margins. This is believable but was a red flag to many on the call.
I chalk these issues up to a management team that is still less familiar with answering to public shareholders. The issues above are cause for concern but Q1 did not definitely answer the question whether competition will crush skullcandy's gross margins over time or if the brand is strong enough with consumers to survive the coming shakeout in the headphone market with high returns.
bgg, you made me laugh out loud, "onepoint has always been right" that is true if you been here for a week or two. he missed every technical call for 3 months. it's like a blind squirrel finds a nut once in a while. can i ask when did you buy?.
Let me add another reason I think the stock is in trouble short term here.
When the CFO resigned, there was at least cause for the stock to drop. When it was seen that it was overblown, there was a relatively quick recovery.
The stock is tanking now just because. . . there must have been a massive general disappointment with earnings/margins/lack of short-squeeze, whatever. This stock has got to find SOLID support somewhere before buyers are going to feel safe. . . that, in my opinion, will take some time.
I've been keeping up with this message board and have to give credit where due. You've called everything that has happened. I'm in this POS at 16.68 now. Is there ANY way for a bounce soon or should I cut losses now?
Well thanks bgg. I try to be completely honest and provide detailed justification, but the general level of technical trading knowledge with some on this board is so low they completely miss it and/or diss it. Turtle and John have good trading instincts. They don't get dissed though because they are more sensitive to the fragile egos of the funnymentalists.
I think there is a good possibility for a bounce but I'd have a stop order in place. I'll follow up later.
I'd say wait until next fall. By that time you should know who is right: The CEO who raised revenue guidance for the year, or the shorts who believe he was lying and that SKUL is "finished" with sales in an actual downward spiral. I believe the CEO myself. I've never known him to lie to lie to his stockholders.