BODY - Body Central

[Martian]

Body Central is a women's apparel retailer (founded in 1972 and IPOed three years back) with a market cap of 120 million. It  crashed from $30 from sometime back to $7.30  because they messed up the third quarter for 2012.  The CEO and Chief Merchandising officer sold tons of shares before it crashed. They both have resigned and a new team is in place.

 

Earlier this year the company told it expects to bleed in the first half of this year. But the stock ran up from 7.5 to 12.5 recently expecting a better quarter, but crashed back to 7.5 when the company lost more money due to aggressive markdowns. It has no debt, and has 38 million in cash i.e $2.38 per share.  The stock is at a three year low below the IPO price. Looks like the bad inventory is almost gone and is replaced with new merchandise.  So it will be back in the black soon and the share price may reach mid teens.

 

I think this is a very simple turn around with one foot hurdle unlike JCP ( with 17 pages discussion)  ::)

[Carvel46]

Thanks for the post. Zeke Ashton has owned this for a little while. These washed out apparel retailers often seem like lottery ticket stocks. Wonder what Zeke's insight might be?

[DTEJD1997]

Hey all:

 

Yes, I've got this one on my watch list.

 

It reminds me a bit of the situation at Charlotte Russe.

 

What was so surprising to me, was that there are retailers that sell clothing to young women that is almost disposable.  That is, the clothing has such a low price, that you could get an outfit for $30.

 

If you wear it 3-4 times, you get your money's worth.

 

What was also surprising was that clothing could be designed, manufactured, shipped, sold and a profit made at every stage.

 

Maybe Body Central will eventually go the way of Charlotte Russe, getting bought out.

 

It would be kind of odd for an IPO to get taken out so quick though.

 

An interesting situation, but I think it may be a little while before things get straightened out.

 

Definitely one to keep a sharp eye on though.

[obtuse_investor]

Interesting.

 

Looks like Tilson's T2 capital built a position in Q4 2012 and Q1 2013. It is a small position, about 1.7% of long portfolio.

 

At current price, the margin of safety isn't large enough from a balance sheet perspective.

 

Here are some quick notes (based on Q2 numbers) for everyone:

 

- Shares outstanding: 16.65M

- Cash + Short Term: 38.8M or 2.33/shr

- Book: 91.69M or 5.5/shr

- TBV: 63.97M or 3.84/shr

- they took a 10.3M or 0.62/shr goodwill impairment

 

 

[Phaceliacapital]

I am not America based so maybe one of you guys should let the wife try out the online store to give us some feedback in terms of customer service and quality of the product???

[Phaceliacapital]

Ownership structure details:

[Phaceliacapital]

Don't know North Run but these are their top holdings (according to BB):

 

[ItsAValueTrap]

The CEO (Brian Woolf) used to work at Lane Bryant (plus sized clothing; previously traded as CHRS before going private) and at Cache (publicly traded as CACH).

 

Here's something random about his stint at Lane Bryant:

http://fattiesunited.wordpress.com/2010/08/20/fat-fashion-%E2%80%93-lane-giant%E2%80%99s-brian-woolf/

Mr. Woolf said that Lane Byrant’s customers are most concerned with comfort, then fit and finally style.  “She’s not there on the cutting edge of fashion.  She might be a year behind.”

He seems horribly out of touch about creating value.  Look at Lululemon's margins and its insane return on invested capital... fashion matters.

[ItsAValueTrap]

Lane Bryant (June 2008 - Feb 2013):

 

Woolf ran the Lane Bryan segment of Charming Shoppes (CHRS).

 

Lane Bryant net sales

YE2008- $1,232.3

YE2009- $1,113.6

YE2010- $945.8

YE2011- $977.9

YE2012- $991.8

 

CEO of Cache (2000 - 2008):

Initially, Cache did very well under Woolf and expanded stores/revenues/everything.  Along the way, the company's founders (the Saul family) sold their shares in secondary offerings.  Woolf also sold some shares in the secondary offering.  (I don't think that he should have done that.  Selling your shares in a secondary offering signals that you have little faith in your own company.  He could have sold them in the public market at a better price and without things looking so bad.)  In hindsight, insiders sold at the top.

 

The company's financials started to deteriorate for the next few years.  At the beginning of 2008, Woolf jumped ship.  I haven't figured out why Cache imploded while Woolf was its CEO.

[Phaceliacapital]

Ugh :D

 

Thanks for the info!

[LanceSanity]

Linda Greenblatt's lecture on retail: http://www.valuewalk.com/2013/08/greenblatt-cbs-investing/

 

"The time to buy is when everybody knows they are missing comps, have inv issues, etc.  You know what, if she knows it, then everyone knows it.  This is the time you have to be looking at it and thinking like a contrarian."

[ItsAValueTrap]

Anybody know what she did after her hedge fund closed?

 

Here are the 13-F filings for Saddle Rock:

http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001352420&owner=exclude&count=40&hidefilings=0

[ItsAValueTrap]

I've looked at Saddle Rock's 13-Fs in the past and it struck me how super concentrated the portfolio was.

 

http://www.sec.gov/Archives/edgar/data/1352420/000127914808000010/srq407.txt

 

At the beginning of 2008, there are pretty much only two positions:

Long ANF common - abercrombie and fitch

Long AEO common - american eagle

(Long AXP calls; very small position)

(Long Ameriprise Financial calls; very small position)

 

Then these stocks got crushed in 08/09, and only now has AEO recovered.

 

It looks like her strategy was to swing-trade a small handful of retailers.