Dressbarn, Anne taylor, Chico's all doing well now. The stocks are way up. I think this company should put itself up for sale or get someone in there that knows what they are doing.
The same morons are in charge and all they have done is lose money and get sewed for stealing trade secrets. It's been a nightmare for everyone involved. It's like there are no adult business people involved in this company. Cache should not be a public company because they are not worthy.It is a sad sad state of american business.
100% agree.........actually Chs with their WH/BM stores would be an ideal candidate to buy them out......interesting also that Cache just pinched one of WH/BM merchandisers to improve their selection...
Chico’s would be a great company to buy Cache, the management is clearly stronger at Chico’s. Cache’s management team just keeps making the same mistakes over and over again. They discount the merchandise 50% and then complain that they don't make any money. It's ridiculous! Someone needs to step in and take charge of this company. I’m surprised that big shareholders have not been more proactive.
No problem, Just quick comment to add something to my previous messages:
You know, i like management team. They have been very conservative and you see that when you look their balance sheet and other actions they have taken. Many of their competitors have over expanded their store base last years, and lock up to rent rates, what was in many cases uneconomical.
They have managed company somewhat different manner, they have utilized last three years almost $40M stock buybacks (75% today’s Market cap), quite attractive prices and that will give huge boost in future, for company’s intrinsic value per share basis.
Of course there is something what I don’t like in this company, like modification of compensation plan what went throught in last meeting, changes (deeply downward revised exercise prices) was more than generous, it was gift. And slower pace on share buybacks, in times when there should be more opportunistic and collect all shares what Mr. Market gives away for free. But no one is perfect.
And like I said; in earlier message:
“Ranni: Don’t let accounting earnings mystify your judgement. You should look cash flows.”
If you listen last 3Q conference call carefully, it will give you clue:
(38:50) Analyst asks: “House keeping question, how much your inventory was down per square foot and how much you planned to be down in Q4?”
Caché’s CEO: “We don’t have those calculations right here, but like Maggie said earlier: it will be pretty consistent. The levels won't change significantly… we are very excited to keep them lower… err we are not excited about it, but I think its right thing to do… “
I’m excited too what comes to inventory levels ~$19M (Q4). You have to go back, more than decade (1998) to be as low at dollar basis. I think "leverage" to generate sales couple next years is almost twice what it was 1998. One would say, they have been more than conservative what comes to accounting. ;) But I like that.
Who knows what will happen in future, but if you look their:
Balance sheet & cash pile (68% of Market cap).
Reduced share count with buybacks +16M -> 12,7M.
Cost cutting actions +1.14$ (per/sh).
Inventory levels are lower than ever in this decade (dollar basis).
To put it simply; I would say, they have better days ahead.
Disclosure: To give some clarify, for my earlier "load up the truck" comment, i have to say this is not just talk the talk; at this point I have accumulated more than 31k shares. I think its very rare opportunity to buy so well managed company like Caché at these prices.
I hope you understand, i have some difficulties to write english.
Please, feel free for comment.
Three years later and 20 million in losses the big boys finally decide to do something. If they had listened early they could have saved 20 million. Andrew Saul is an arrogant incompetent. Micheal Price saved this company from bankruptcy.
Message part 1/3: (vertical integration + earnings power)
jtmaimi, Thanks for your response!
“jtmaimi: …they will design and produce the majority of their products. This means that they will have to use American workers to produce all the products. The main disadvantage is labor costs. American textile factories can’t compete with overseas factories”
I don’t know am I missing something, but you know, we see this ongoing transition to vertically integrated company very differently. I understand your concern about cost of American worker and the fact that you cannot compete with Asian or other countries in NOT too sophisticated works like apparel manufacturing.
But if I understand correctly, they have hired new talent to their designing and merchandise management side to NYC. All apparels are manufactured in more cost efficient countries somewhere in Asia or South-America. I think its quite common strategy if you look their competitors.
I would liquidate my position if they would try to do something so desperate (as manufacture textiles in USA). I don’t know is there possibility that even bigger retailers could compete that way?
Of course this kind of transition when they are starting to produce own merchandise will take time; before everything is running smoothly. I think, this transition to vertically integrated retailer started three years ago, when they acquired AVD. But, I understand your concern; it start to be time to show some results.
“jtmaimi: Sure they got a 7% increase in gross margins for one quarter, but how long can that last?”
I think this 39.5% gross margin is still depressed and it will bounce back more normal levels quite soon.
“jtmaimi: They may be in the black on strictly a cash flow basis and that is fine but in reality they are in the red. If things remain stable for the next three years they will have a stock holders equity loss of 12 million a year totalling around 36 million. “
Don’t worry about these kinds of scenarios. My calculations say that they will do just fine in next years; I see in this case $ 36 million is big number, but not much more. I think those cost take outs are running somewhere $ +1.2/share and that’s just sick when you compare their EPS history. Of course its hard to say, how they will tick up when sales levels rise, but one would think some part of those are permanent (not variable).
If you take hard look what $ 36 million losses consisted, I would say, it is much better when all that crap is swiped out of books, and some of those off-balance sheet items (severance costs etc) are also behind. They could do this kind of “cleaning” over longer period of time and shamble forward, but as investor I like, when everything what former CEO had left behind Is cleaned away, so quickly as possible. Often short term pain is inevitable, when trying to achieve maximum long term gain.
“jtmaimi: That would only leave about 25 million in net tangible assets. It might even be hard to keep their doors open.“
And that’s true there is not much tangible assets left, but that’s one reason why I like this business. It’s not too capital-intensive that means they should be are able to earn nice return for invested capital and market place should give some credit for that. When we consider what is going on when tangible equity is shrinking I would say, most critical question is, is this unintentionally or meant to happen. And when you reduce outstanding share count ~22% above book value (and inventories too), it is clear you shrink your tangible equity at same time. We cannot muddle this kind of development with companies which are really bleeding cash, because their of distress situation.
After seeing the results and listening to their conference call it's easy to see why wall street shows little respect to this company. It would be better if they changed top management or sold the company.
I will continue my monologue to give just quick comment related yesterday’s conference presentation.
No single word of buybacks, maybe they are progressing in their untapped plan? It would be good reason to be silent.
They have controlled inventory even tighter manner what I first estimated. $ 16.5M and that’s amazing. You have to go back years 1995 – 1996 to be as low at dollar terms, and of course Caché’s sales potential is doubled – tripled from those days. I have all reasons to believe, in next two years they will be successful in their objectives, turn inventory much faster.
Like I said, even I disagree some capital allocation decision with management team and there is some unanswered questions (like, why buy high $ 14 not low $ 2 – 4?) I still repeat my statement, I like management team and I think, that we Caché’s owners are in good hands. They have long proven track record.
It is still some what difficult to understand this disparity, between price and value. How Mr. Market can be so blind over longer period of time. I agree 2008 capitulation for owners was rough blood bath, and many would still shy away?
I would estimate that, when we break out 7.8$ levels we would be back on the radar (+100Mcap), when peoples are trying to find some undervalued investment opportunities.
Predicting future can be dangerous. If I have to place bets like I definitely have done, I would predict that next two years Caché will be one of the best performer retail stock, by wide margin. You understand the point, it is not best company in industry, but disparity between price and value is so huge.
warning: fasten your seatbelts, this rollercoaster is ready to fly upward.
Thanks for the information. I appreciate it. I agree with just about everything you said. We seem to think alike. I guess this is why we both own the company. Thanks for your upbeat comments. I think something good will happen to this company eventually. It seems that the big boys have the opportunity to make the right decisions to reward shareholders. I guess we will just have to wait.
Are there any other companies you like here in America?
Your English is very good! I understand you completely. I agree with most of what you have said.
I like the fact that they are conservative too. They are doing some prudent things. Thanks for pointing out the inventory status. I guess that could help eventually in the future if the economy turns around.
On the other hand they bought most of the stock back at high prices and stopped buying it back at low prices. I believe they bought a lot at around $14 a share!
They bought back very little at low prices.
They invested very little of their own money in the company. They have little skin in the game. They leave it up to the generous compensation plan.
They were so quick to discount at Christmas the missed the major shopping done in the last two weeks of December.
I guess you are right about nobody being perfect. It is just tough to see their competitors like Chico’s, Dressbarn, Ann Taylor, J Crew doing so well in this environment.
Message part 2/3: (economy and sales levels in future)
“jtmaimi: This unfortunately is very possible. The economy before was based on false profits provided by a housing bubble and home equity loans. Americans used their houses as ATM machines. That is history and now banks are cutting peoples credit. There is no more free money here in America. People are not in the same position they were in over the last decade. I don’t see what will bring a recover in the future.”
As foreigner (from Scandinavia) it’s easier to be more optimistic about future of people in USA, even unemployment is high and retail environment still soft I don’t have to face all that misery, but it’s not much different here where I live, unemployment is creeping +10%, of course competition may be some what easier here for local companies, because here is not so much oversupply of retailers (yet).
What comes to Americans housing ATMs and sales levels in bubble years, I am not so worried about that, even top line has taken hefty haircut +20%.
Who knows what they (management) really think, but when you look that “suspended” share purchase plan (2009), I would say their main concern is not top line, they may feel enough confident to be able to drive top line growth again in future. Otherwise, it would be prudent and natural step to purchase 50% back of our commons stock at discounted prices and do business much more per share basis, even reduced top line.
Still I think best way to create value for shareholders would be aggressive share repurchases at least some kind of blended strategy, where they really begin utilize that cash pile as going forward. One main reason why whole retail industry is not doing too well, is because, companies are not willing to return capital for owners (divs/shr-bb). Everyone is just focused on growth and store expansion and that kind of over expansion is just shrinking everyone’s margins.
Of course in smaller retailers like Caché it would be legitimate be little bigger, especially today as vertically integrated retailer, it could more important than ever to get higher sales volumes to drive margins upward. But there is plenty of cash in books to utilize in both opportunities.