No kidding. I've always said, anyone that shorted this at $2 was in for a rough ride.... $2 already represented all the negative potential....
Not a great quarter, not terrible. Consistently poor. :) Interesting they let 4 officers go... Clearly needed to happen to help with the P&L but... how do you make up for that from a talent perspective. They likely can't recruit very well, or have the ability to pay (I looked at their postings once and they don't exactly go after top talent) at this point. Without good leaders and new thought leaders, you just end up with status q...
I just don't get it though.... I just can't imagine how they rightsize their P&L for these volumes... You biggest expense , labor costs are basically fixed at this point (minimal staffing), are climbing year after year (healthcare and wage rates) by 1 or 2%.... Sales are declining 5%.... Margin rate is declining as the rental mix decreases.... The math just doesn't work....... The math just doesn't work unless they do something major - and they don't seem to have plans for that yet....
Perhaps. HAST has some big obstacles as they have bigger footprints and are standalone (and thus have to drive their own traffic). We'll see.
They haven't figured it out yet:
Q4 SG&A rate was only better than LY because of the lack of abandoned lease expenses. Excluding those costs LY, their SGA rate increased 113bps. Operationally, they continue to de-leverage. Take another 10% of revenue out in 2013, what will it be?
Margin rate in Q4 was down 30bps, including a decline in merch margin rates (which means their new mix of product isn't helping).
""adjusted EBITDA ...was $6.8M .... vs.... $9.2M (ly)"....
Operationally, they continue to deteriorate.
Stock buyback was -very- strange in Q4. They bought 78,000 shares in Q4 at an average price of $2.45. That is crazy. How did they buy at such a high price??? They basically bought at the peak.
Why are accounts payable up 7% vs last year, when revenue is down 8%, and inventory is down 4%? All of their free cash flow is coming from reduced inventory and increased accounts payable. From an ongoing operations, they aren't generating cash.
Basically, I give them credit for slowing the descent, BUT, operationally in Q4 revenue fell, SGA rate increased, and margin decreased. The things they are doing to maintain a lid on it (staff reductions, wage freezes, cutting markdowns/shortage) aren't even keeping pace with the revenue declines...so how much longer can they keep them up?
Finally, used in books/movies/cd's were all down, according to their notes. That isn't good.
I was thinking back to how they never talk about how their programs are working (Gohastings, ebooks, tradesmart, sports store)....
And started thinking more about their ebook program. This is what I found in their FAQs
Do you have a Kindle and goHastings eBooks aren't working?
Unfortunately Amazon, the manufacturer of the Kindle, only allows books made specifically
for the Kindle and downloaded from Amazon, to run on the Kindle.
Now. Tell me again why HAST spend time and energy on building this ebook program? They embarked on tech development that they had 0 experience in, so that they could compete against Amazon!? REALLY? Did someone not stand up in the C-suite and say, that this wasn't the right approach?
I don't think we see any info on these programs from HAST because they were failures. Nothing wrong w/ failing with good ideas...but come on...
Loved the accountability and respinning of the statements. You can now clearly tell they see themselves in turnaround mode, vs denial. The call outs of closing 8 stores, HQ reductions, and the things they are doing was nice. They should have been talking like this 4 years ago (go read my posts...they should have had me consult).
Q4 was flat. $1,6M operating income TY and LY. (Taxes are the driver of the improvement to the bottom line). With that said, that is good work as they -finally- got their SGA going in the right direction.
Free cash flow is a little deceptive. Almost all of it is coming from reduced inventory. In essence, their free cash flow is them slowly liquidating.
Like I said, good improvements, but next year sales will be down another 5-10%... They are in slow liquidation mode here ( closing stores as their leases expire).
In all honesty, this was the first earnings report where they really seems to take accountability (excluding the opening bullets where all they talk about is improvement vs LY, not anything about the actual results). Unfort, it just seems too late. They don't have a business plan that can generate profit at these revenue levels.