By Ian Gilson, PHD, CFA On April 24, 2013 Command Center, Inc. (CCNI) announced its store revenue for the 1Q13 2013. Total revenue declined Y/Y and revenue per store dropped by 13.5% on 58 stores.
The company also announced a change in strategic direction, to focus on gross margins rather than top line growth. In this and prior reports we have mentioned that the key to profit growth was to improve gross margins before workman's comp. expense. In 2012 the company had steadily improved gross margins on a GAAP basis each quarter, from 24.3% to 26.4%. For the 1Q13 the company expects a gross margin of 25%, a slight improvement over 1Q12, but both quarters are likely to be below the 4Q12.
Improving margins on lower revenue suggests that the company has stopped doing business with low margined accounts. The follow through of this move will impact second quarter revenue as well, which will moderate the seasonal pick-up in business. The 4Q13 will (hopefully) not include a major disaster like hurricane Sandy.
The company has decided not to report the monthly revenue numbers but to only report the standard SEC filings on a quarterly basis. This will probably increase the range of our estimates for each quarter (we use the midpoint of a number of estimates) thereby effecting the margin of error. In our experience this has increased the volatility of the stock price.
Given the new strategy and its uncertain effect on net income, together with the loss of important information, we have decided to change the rating from Outperform to Neutral. We have reduced our target price from $1.00 to $0.45 a share.
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On April 24, 2013 Command Center, Inc. (CCNI) announced its store revenue for the 1Q13 2013. Total revenue declined Y/Y and revenue per store dropped by 13.5% on 58 stores.