I held my position for 5 years and had added to it about 2 years ago. Greg Tunney is an excellent CEO, but I can tell you a decision to say "yes" or "no" should not take 3 months to determine if in shareholders' best interest and still no sign of any decision being made. They refused to discuss on conference call. I wonder if there is an acquisition in the works. There is much more here than meets the eye...that I am sure of. It will get interesting once the fireworks get started. I suspect they will turn down the offer which is the reason I sold. Stock will drop to $16 or less if that happens as business is clearly weakening. The only thing keeping the stock where it is...is the offer on the table.
Any thoughts when we will hear the Board's decision on the $20 buyout offer? I am thinking management will reject it. Buyout at $20 appears to be fair, though, especially given last quarter's weak results (and it appears next quarter will be the same thing). Just don't understand why they haven't announced their decision yet....How long does it take to evaluate the offer? It's been on the table for quite some time. I sold my entire position in anticipation of a rejected offer as upside is limited...I view downside with certainly much more risk.
If the Board rejects the offer, expect the stock to lcorrect 20% or more. Business is weakening....I think Greg Tunney is a great CEO, but am disappointed they still have not closed a new acquisition since Baggalini. If offer is rejected and stock drops significantly, I may reestablish a position.
Sentiment: Strong Sell
I have been a long-term investor of RCKY for a long time and have generally been bullish about its future prospects, given that it was a value play. For the first time, I don't believe this Company is a value play any longer based on current share price at $14 and change. Fair value based on the most recent results is likely more in line to be about $11 based on my model and I do expect it to retreat further. I am growing concerned about this Company's prospects and was very disappointed with the financial results yesterday.
First the good news - they paid off a significant chunk of debt. I commend management for that. Gross margins improved slightly for the quarter 35.7% vs. 35.1% for the prior year quarter. They expect overall margins to improve in the second half (due to lower input costs) and expected 15% top line growth for the first half of the year related to Tractor Supply (lower margin business - mid-to high teens) and military business which is only 12-13% margins.
However, there was far more bad news than good news in these results. For the year, a 7% Return on Equity is hardly anything to get excited about. It is poor and is a big step back from results last year if you exclude the one-time $5.3 million pension charge to eliminate the defined benefit plan (which was a good long-term business decision). If you add back that charge to compare apples to apples, the company earned $13.6 million in 2011 vs. $8.9 million in 2012. What is the story here management? Year to year, revenues are down 4.7% for the year, but what is more disturbing is the 9.2% drop in sales for the quarter (year over year). They also expect SG&A costs to be up related to new ERP system depreciation (this is non-cash), but there will be add'l costs related to new marketing initiatives in healthcare, etc - I believe they said $3 - $4 million increase. Not good..... They gave little guidance about 2nd half....other than to say that bookings are trending better than last year. I personally don't think the Company will make as much profit in 2013 as they did in 2012, based on outlook, unless Durango and this new healthcare footwear (to start shipping in May/June) takes off. I am skeptical.
I am not sure if any of you listened to the conference call, but first they blamed the weather again for poor results in the hunting/outdoor business. How many times are we going to hear these excuses? I am sick of it. Could it be that they are losing market share, that they didn't execute well, or just that they haven't had any innovative new products for awhile here? No, we didn't hear them accept any accountability for that. There is a serious contraction in this business which they hardly addressed, but instead spoke about how great the Durango business is. This is a small part of the overall business of RCKY brands.
Year over year results show a contraction in gross margins from 36.6% to 35.1%. This is a big deal guys. Annual trends are far more important than quarterly trends, due to changes in product mixes each quarter. Given this outlook, I have decided to liquidate my entire position as the risks at this valuation far outweigh the upside. There are much better opportunities out there than RCKY as this valuation. Of course, there is always a chance that the Company gets bought out like LaCrosse did, but I wouldn't hold my breath. We'll see what happens. I wish all of you good luck .
I've owned Rocky a long time and it is my largest individual stock holding based on value. To see this kind of appreciation and breakout (in excess of 20% appreciation YTD) is really unprecedented. This is always their strongest quarter. Is it possible the good news is leaking out? Perhaps its entry into women's footwear is better than expected.
I'm not going to look a gifthorse in the mouth, so I am going to enjoy it while it lasts. Hopefully management pulls a rabbit out of their hat with earnings report next week. Cheers RCKY investors.
Really? - Perhaps reread what you just wrote because it is pretty obvious you don't understand what a balance sheet or cash flow statement even is. According to the last quarter 10-Q filed with the SEC, cash and short term investments were $33.2 million. If they are guiding cash to be $37 - $38 million, it doesn't take a rocket scientist to figure out they are cash flow positive to the tune of $3.8 - $4.8 million for the quarter because they have no bank debt. The Company had been bleeding red ink for several quarters and we are definitely seeing them building cash again instead of burning it. This stock has potential.
Sentiment: Strong Buy
CBK's guidance issued after-market is extremely positive (SSS trend in upper teens - Wow!) and the Company appears to be hitting on all cylinders again. This guidance is even better than what I considered a very upbeat management projection just a short time ago. This is no small feat. Scour the retail reports and very few retailers are putting up these kind of numbers in this economic environment. Even more positively, the Company is cash flow positive and net income positive.
I am looking for the stock to continue its uptrend north and the stock appears to be significantly undervalued, despite nearly a 200% increase in August when trading at approx $2 when I established my position. Assuming these trends hold firm, it is not beyond the realm of possibility to be at $10 or higher before the end of the year. Look at the historical chart. CBK had fallen so far so fast that I believe it has huge upside potential. Cheers!
Sentiment: Strong Buy