BLUE does look interesting...analyst says:
Excerpts from a new research report by Eric Beder of Brean & Murray (2/15/2008)....from another message board
Mr. Beder estimates $54K net income for 4Q 2007 to be reported in 2 weeks. He also estimates that 1Q 2008 net income will increase to $441K.
We are maintaining our estimates, target price and Buy rating on BLUE after meeting with management in Las Vegas recently.
Valuation. Our target price of $2 derives from a multiple of 30x our 2008 EPS estimate.
We believe after a series of major reshufflings and strategic changes, that Blue management, under new CEO Glen Palmer has made material progress in reshaping the company and creating a materially more coherent structure which should drive profitability for Blue Holdings.
Although the low stock price makes an investment in BLUE highly risky, we are encouraged by what we are hearing and seeing and feel comfortable with our Buy rating.
Believe 4Q07 was a quarter of progress and that the bleeding has stopped in terms of cutting projections.
During the quarter management made material progress in cutting costs and reducing a major inventory overhang; we believe Blue will be able to achieve our projections for the quarter and will be materially better positioned, in terms of both working capital and sales momentum (after a material reduction in inventory), than at any time in recent history.
Repositioning of brands has created a coherent marketing strategy.
Management has taken the three denim driven brands and crafted a highly segmented strategy: 1) for Taverniti, the focus is higher end fashion driven looks at specialty stores and premium department stores; 2) at Antik, the pricing is below Taverniti, the shift is to more basics and Macy’s is a large (and quickly growing) part of the department store business; finally 3) Yanuk is the starter brand, offering basic items at entry level pricing.
We view this deeper level of differentiation as creating order in what was formerly a highly overlapping and somewhat confusing structure; we believe this shift has created the potential for all three brands to expand without materially infringing upon each other.
Faith another positive article. The company’s distribution of this
high-end European knitwear line has continued to gain momentum, as these unique (and very high end) items have gained an increased following on the coasts. Management continues to increase distribution of the line and shift the market timing patterns from a European to an American calendar; we believe there remains material growth in the division.
Taverniti remains the high-end women’s fashion brand, but is adding more basics and driving men’s sales.
From almost entirely a fashion driven business, Taverniti has added a layer of basic items, which allow for the creation of a recurring business. The rollout of basic’s has also sparked a renaissance in the men’s category, as the slightly less embellished and aggressive styling has attracted a fashionable male customer
Antik: Building off traction in Macy’s and a better business model.
Antik is one of handful of premium denim plays in Macy’s and by far the most fashionable (in terms of consumer profile); as such, the brand has rapidly become a key player for Macy’s. The shift has also focused on more core items, as the mix is now 40% core looks (versus 10% last year). In addition, the shift to more basic looks and to materially better fits, has driven women customers, impressed by the high level of fashion/value ($148 is now the opening price point).
Another emerging piece of the business has been knitwear, which is now fully tied into the bottoms looks; knitwear is now 25% of the Antik business and has been a key positive at Macy’s. We believe the shift to basics at Antik (and now Taverniti) has created both a more recurring and a more stable bottoms business, which should become more evident in 2008.
AI
