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Under Armour, Under Its Targets (UA)

Under Armour (NYSE: UA) has reported earnings that look like more disappointment is on the way.  The sports apparel company posted $0.06 EPS on revenues of $157.3 million, although First Call had estimates at $0.03 EPS on $153.6 million in revenues.

While this is above plan on the EPS side of the equation, this is actually a 71% drop in net income.  Gross margin was 47.6%, down from 48.7% in the prior year.

The company is also backing 2008 revenue goals of $765 to $775 million, although estimates from First Call are $775.2 million.  Unfortunately, Under Armour is backing away from the 40 to 50 basis points improvement in margins and now sees a drop of 30 basis points in margins to about 50%.  Therefore net income expectations are now $103.5 to $104.5 million, down from prior targets of $108.5 to $110.5 million.

Shares are indicated down over 8% at $35.25 in thin volume pre-market trading; and the 52-week trading range is $25.39 to $73.40 (although lowest close was $28.01 and second lowest close was $31.29).

Jon C. Ogg
April 29, 2008

Under Armour Investors Suit Up For Earnings (UA)

Tuesday in the early hours of the morning, we’ll get to see earnings out of Under Armour, Inc. (NASDAQ: UA).

The estimates for the performance apparel company from First Call are $0.03 EPS on $153.65 million in revenues.  Next quarter estimates are $0.02 EPS on $161.11 million in revenues. Estimates for fiscal Dec-2008 are $1.28 EPS on $775.28 million in revenues.

Options traders appearto be braced for a move of nearly $3.00 in either direction.  Analysts have an average price target north of $50.00, and Under Armour’s 52-week trading range is $25.39 to $73.40.  Shares closed Monday at $38.58.  We'd like to note that while shares have an intraday low of $25.39, this one really had a low close of $28.01.

With shares down by almost half from last year's highs, we'll all know the answer of whether this was a GARP stock or just another overestimated apparel growth story. 

Jon C. Ogg
April 28, 2008

Chico's FAS, Same Store Sales Still In Tank (CHS)

Many have been hoping that the bloodletting in the aisles of Chico's FAS inc. (NYSE: CHS) is coming to an end.  If that is the case, it isn't evident in the numbers yet. 

The womens retail and apparel chain posted a decrease in same store sales at -20.7% for the five-week period ended April 5, 2008.  It claims that without the effect of Easter this season, same store sales would have been down in the 18% to 19% range.  March total sales results for the five-week period ended April 5, 2008, decreased 15.2% to $162.1 million from $191.2 million.

Chico's closed at $6.40 yesterday.  Its 52-week trading range is $6.40 to $27.94.  Shares are indicated down close to 3% at $6.21 in pre-market trading.  It appears another 52-week low is heading its way.

Chico's growth days are done.  For it to recover it has to show some stability throughout its chain, because it can't just keep opening new stores in saturated areas.  The Company has 608 Chico's front-line stores, 38 Chico's outlet stores; 314 White House | Black Market front-line stores and has19 White House | Black Market outlet stores; 70 Soma Intimates front-line stores and 1 Soma Intimates outlet store.

Who know for sure, but maybe it would even consider breaking up its brands.

Jon C. Ogg
April 10, 2008

Jon Ogg produces the Special Situation Investing Newsletter.  He can be reached at jonogg@247wallst.com and he does not own securities in the companies he covers.

Old Navy Stinks Gap Same-Store Sales (GPS)

Just when it looked like Gap Inc. (NYSE: GPS) was starting to bottom out, it appears that was only a resting point.  Thing go from bad to worse.  Gap Inc. March Comparable same store sales came in at -18% with a total company store sales down 12%.  We were only looking for -7.7% to -8%.

Old Navy, which we have referred to as one of the lamest brands in the country, posted same store sales of -27%.  We have taken some heat for saying this dog of a chain should be spun out of the company.  No one would likely buy it, so that's the only hope here.  There is a reason we said this may be one of the larger US brands that disappears.

Its core Gap Stores in North America showed a -14% drop in same store sales, while Banana Republic showed comparable store sales of -8%.

The company has somehow "reiterated" that it expects diluted earnings per share of $1.20 to $1.27 for fiscal year 2008 (Jan-09), which we find surprising given the drag this morning.  First Call has estimates at $1.26 EPS.  With a major drop like this, that may be very Panglossian of the company.

Gap Inc. shares are down 4%at $18.12 in pre-market trading.

Jon C. Ogg
April 10, 2008

Jon Ogg produces the Special Situation Investing Newsletter.  He can be reached at jonogg@247wallst.com and he does not own securities in the companies he covers.

Nike's Knight Sells $30 Million In Stock (NKE)

There were four separate filings today showing that co-founder and Chairman Philip Knight of Nike, Inc. (NYSE: NKE) filed to sell shares.  The trade dates were listed as April 8, 2008.  The four separate filings show a total of 465,000 Class B common shares with prices going from $67.43 to $67.08, then at $67.07 to $66.78, then $66.77 to $66.48, and finally then $66.47 to $66.38.  If we just take a simple rounded average, this appears to be a total share sale in the vicinity of $30 million.

Before pushing the panic switch, he does hold more than 2.6 million shares of Class B common stock. There is also more.   According to the last filing he also holds more than 95 million shares of the Class A Common Convertible shares.

Shares sit barely in negative territory today at $66.41.  The trading volume is also rather light at less than half a normal trading day.  Nike's 52-week trading range is $51.50 to $70.60.

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Jon C. Ogg
April 9, 2008

Jon Ogg produces the Special Situation Investing Newsletter.  He can be reached at jonogg@247wallst.com and he does not own securities in the companies he covers.

Chasing A Top In Nike (NKE)

Nike Inc. (NYSE: NKE) is one of the ubiquitous brands of today's world.  As long as it keeps doing what it is doing now and as long as it keeps its endorsements strong, it's in a great place.  Frankly, I love the brand Nike from knowing that a certain size has always fit in shoes to knowing that a certain size always works in the shirts to knowing that its quality is high and it won't embarrass you at a country club or out on Main Street.   

An article in this week's "Inside Wall Street" in Business Week accounted for a 1% pop in after-hours trading Thursday. Business Week still moves stocks.  But when you look at the stock price target offered up is and then compared it around to other targets from other analysts, you might wander if there is much value to the stock.

The article points to magical Goldman Sachs target that has been raised to $71 from $67 in the last 6-months.  The article talks about the close having been $67.97.  That was Wednesday's close.  Thursday shares closed up 1.3% at $68.90 and traded up to $69.65 in after-hours trading.  If you got the after-hours print you could expect about a whopping 1.8% return before any transaction fees to Buy and Sell.  If you got Thursday's closing price, then you'd be expecting a 2.95% gain before fees to buy and sell.  And if you got the magical Wednesday cut-off piece of $67.97, then before buy/sell fees you'd have a whopping 4.2% gain if that $71 target comes.  The average target on Wall Street is slightly over $72.00.

Frankly, a Certificate of Deposit or CD from a risky FDIC-chartered bank that needs capital is a better reward.  BankRate.com is advertising a 4.20% yield CD from Countrywide with FDIC insurance.  You are insured by the Feds and as long as the bank doesn't implode then you get the CD interest.  If Nike heads south or has a factory problem or has any supply constraints of raw materials or supplier/contract issues, it will take fire immediately.  Add in Nike's 1.3% dividend and we're still talking about showing up to the batters box with the little game night kids bats they give out at pro-baseball games.

We do not like to bash other reports or other reporters or analysts out there and that isn't the point.  But if we are all chasing this sort of expected return, then we'll all be calling each other Commerade and we might even start believing the Labor Department has its economic numbers right and that there is no core inflation.

Nike's market cap is now north of $34 Billion.  I's a mature company that still grows and is a growth company outside the U.S. in emerging markets.  But it is a mature company.  When we covered this around last earnings it looked fairly priced.  Even though it has risen since, now it still just looks fairly priced with a potential topping-out phase either in place or coming up soon.

Nike gained more than 30% in 2007, roughly 16% in 2006, gave a slight negative return in 2005, and gave an above 30% return in 2004.  Unless there is a massive wave of price target upgrades, it's safer to wait for a good pullback on a news item or outside event on this one.  A prudent speculator might even say, "Just Don't!"

Jon C. Ogg
April 4, 2008

Jon Ogg produces the Special Situation Investing Newsletter; he does not own securities in the companies he covers.

Talbots, When Low Growth Is Good Enough (TLB)

Talbots (NYSE: TLB) is seeing shares surge today after the apparel maker and retailer unveiled its strategic plan for long-term growth and for productivity improvement.

For starters, the company reaffirmed its guidance and it sees Fiscal-09 between $0.47 and $0.52.  We have consensus as $0.37 EPS from First Call. Talbots is planning for top-line growth of roughly 3%, based on a slightly negative comparable sales with the Talbots brand being 11% and the J. Jill brand rising by +1%.

As far as productivity, Talbots is becoming a design-led organization that will focus on compelling merchandise that reflect each of its brand's unique identity. It will streamline operations, control costs and inventories, use innovative marketing, and implement more efficient processes enterprise-wide.

The company has identified its key growth platforms to build its business on going forward that will drive long-term growth, profitability, and enhanced shareholder value.

Shares are up over 10% today at $11.90 in mid-day trading.  Three or four months ago, this news would have probably sent shares south because of low top-line growth.  With a $6.48 to $26.10 trading range over the last year, it looks like the earnings beat will be plenty.  Now it just has to execute this plan.

Jon C. Ogg
April 1, 2008

Jon Ogg produces the Special Situation Investing Newsletter and he can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Jos. A. Bank Swarmed With Short Sellers (JOSB)

When most people think of Jos. A Bank Clothiers Inc. (NASDAQ: JOSB), they think about conservative apparel for men's suits, sports coats, slacks, and dressy-casual attire.  It has been around for what seems forever and it targets more traditional clothing that isn't out of fashion by the next season.  But in the world of stock investing, short sellers are almost always active in the stock for a myriad of reasons.

We did a screen in the wee hours of short interest growth in stocks, and for some reason Jos. A. Bank Clothiers just didn't jump out in the screen.  It should have.  A reader inquired as to why it wasn't included in the screen.  Usually we go for more active and more widely held stocks, but after looking at this one it's a pretty amazing number.

The short interest was very high already at the end of February with 11.03 million shares listed in the short interest, and that was up from more than 10.7 million shares in mid-February.  But the March 14 short interest was just astounding with 15.19+ million shares being listed in the short interest.  NASDAQ cited that based upon about 900,000 per day, that is a day to cover ratio of 16.86.  A quick look at Google Finance indicates a float of roughly 18.17 million shares in the float, which is right in line with what the company lists on its own fully diluted as 18.18 million shares.

So 83.5% of the shares outstanding are short.  The company had already issued preliminary earnings back on February 7 for its it full fiscal 2007 numbers.  Now the company is on a quarterly sales results releasing basis.  This stock has been hit by short sellers throughout the years, but shares over the last year have fallen from $45 to under $25 now.  Shares are actually at the bottom of what would be a 3-year trading range.

It is hard to know what all these short sellers are expecting to come out of the company.  Maybe it is more cautious on sales expectations due to a stretched consumer, maybe it is that they are expecting a weakening balance sheet due to credit or due to merchandise mix.  Maybe they are expecting even worse.  When you see a short interest that is this large of a percentage of the float it's hard not to scratch your head.  50% of a float being short is giant, but more than 80% is off the charts.

Options are pricey as well.  An at-the-money straddle as a bet on volatility with an April expiration would cost more than $4.30 currently.  That's the sort of volatility pricing you usually see on a biotech stock ahead of an FDA review.

If this company issues any news that is good or just not so bad, calling the short covering action here as being "Spring-Loaded" would be an understatement.  Unfortunately the analyst coverage on this stock is rather thin and analyst estimates aren't uniform.  Seeing short interest this large is almost never without reason.  But you also rarely see this much of a float as being short.

If we get any word out of the company, we'll follow up on this one.

Jon C. Ogg
March 27, 2008

Jon Ogg produces the Special Situation Investing Newsletter and can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Nike Stock Stuck In Channel Ahead of Earnings (NKE)

After today's close of trading, we'll get to see the earnings report out of Nike (NYSE: NKE).  First Call has estimates at $0.81 EPS and $4.36 Billion in revenues.  Next quarter is also its fiscal year end and estimates are $0.97 EPS on $4.85 Billion in revenues.  While estimates for Fiscal May-2008 are $3.58 EPS, its May-2009 fiscal estimates from First Call are $3.89 EPS on $19.86 Billion.

One thing has become front and center for Nike, and that is its international sales and it seeing a big earnings jump because the US Dollar has weakened over and over.

With shares up about 1% today at $62.50, they have traded between $51.50 to $67.93 over the last 52-weeks.  For most of the last year this has traded between $55.00 and $65.00.  Analysts have an average price target of close to $71.00.  Keep in mind that options expire tomorrow, but it looks like traders are braced for a  move of up to $2.00 in either direction.

The leader in sports apparel has a current year P/E ratio of 17.5 if it hits its mark, and ahead to next year its forward P/E ratio is 16 on a rounded basis.  The value is in having the perhaps world's strongest sporting apparel and sporting goods brand.  The question over value versus price boils down to how much of a market premium you think it deserves because of that brand leader strength. 

Jon C. Ogg
March 19, 2008

Did Zumiez Finally Bottom? (ZUMZ)

Zumiez Inc. (NASDAQ: ZUMZ) saw shares rocket in after-hours trading after the company posted earnings.  The apparel and equipment retailer for young adults in extreme sports )snowboarding etc.) posted earnings of $0.42 EPS on $126.6 million in revenues, while First Call estimates were $0.38 and $126.1 million.

It has also predicted that its 2008 profits would see $0.90 to $0.93 EPS, while First Call has estimates at $0.92; it also see a low-single digit same store sales gain.  2007 came in at $0.86 EPS on same store sales gains of 9.2%.

Zumiez didn't try to hide recent woes as it did address near-term environment as challenging.  But the hope here is that since shares have fallen by more than two-thirds from high to low is that even a maturing Zumiez with less than 10% EPS growth and a low-single d-git same store sales growth represents value here.

At $0.86 EPS for 2007, it now has a trailing P/E ratio of 16.4 based on the close of $14.10.  Its forward P/E ratio at the mid-point of guidance would be 15.4 based on that $14.10 close, but with shares up at $16.40 after the close its forward P/E ratio at the mid-point of guidance would be 17.9.  That isn't grossly expensive and it isn't grossly cheap.

The "cheap" aspect is that this one can show incredible outperformance when it does beat, and Wall Street may be giving the company the benefit of the doubt and hoping for very conservative guidance being the case.  The other energizer is the short interest as this had 7.45 million shares in the short interest, which is around 40% of the free float and almost 12-days to cover.

All in all, it's probably a safe bet that the worst has been seen so long as it doesn't disappoint ahead.  Just don't go out on a limb looking for the old growth days and the old performance in the near-term.

Jon C. Ogg
March 13, 2008

Genesco Braces For Earnings (GCO, FINL)

Thursday morning we’ll get to see earnings out of Genesco Inc. (NYSE: GCO). The estimates for the footwear company from First Call are $1.01 EPS on $485.82 million in revenues.  Next quarter estimates are $0.21 EPS on $356.77 million in revenues. Estimates for fiscal Jan-2009 are $1.93 EPS on $1.61 billion in revenues.

What is interesting about this report is that this is the first earnings since it let Finish Line (NASDAQ: FINL) off the hook.  It did receive a large sum and even a chunk of Finish Line stock as part of the settlement, although that won't likely be reflected for another quarter or so.  Shares were hit hard over this, but frankly it's better off being on its own rather than under Finish Line.

Frankly, it's hard to imagine that any trader will be expecting much at all since the company was so distracted.  That also means that anything that looks decent or actually good would run up shares.  This had 3.47 million shares in the short interest, which is about 9-days to cover and would allow this to act as a catapult for shares if the report is well received.

Analysts have an average price target of about $29.00. Genesco’s 52-week trading range is $19.36 to $54.15, and it saw a low of $19.38 today before closing at $19.79.  This will be one to watch because its stock has been battered and beaten so much over the failed merger.

Jon C. Ogg
March 12, 2008

Urban Outfitters Proves Its Performance (URBN)

Urban Outfitters (NASDAQ: URBN) showed why its stock has done well while others in retail have floundered for much of the last quarter.  The apparel store posted earnings of $0.32 EPS on 29% revenues growth to $465.4 million, and First Call estimates were $0.29 and $463.5 million consensus.  This was also record earnings for the quarter.

The company had already shown comparable sales cumulatively generating an 11% gain, and were broken down as 6% at Urban Outfitters, 18% at Anthropologie, and 19% at Free People.

Shares are trading up 6% initially this morning at $31.18, and that is nearly a 52-week high with a 52-week trading range of $19.20 to $31.32.  If these prices hold on the stock, this will mark more than a 25% share gain since the January lows.

Jon C. Ogg
March 6, 2008

Finish Line, Better Lucky Than Good (FINL, GCO, UBS)

If there is one company that needed to get out of its crazy merger, it was Finish Line. Inc. (NASDAQ: FINL).  The company last year made a greatly leveraged buyout offer to acquire Genesco Inc. (NYSE: GCO) for terms that were maybe too high in general but that were definitely too high for what Finish Line could afford.  Despite a high fee having to paid, Finish Line is one lucky company today.  The two companies have settled after a long legal fight over this merger, Finish Line will give Genesco a stake in the company and pay a termination fee, and get out of its obligation to complete the buyout of Genesco.

We recently covered Finish Line in our weekly "10 Stocks Under $10" newsletter with the note that if the company could not wiggle out of that merger that it was going to implode from the leverage and financing.  We had noted this one being in trouble even last year.  The worst part for common shareholders in this company is that the dual-class of shares keeps the bulk of the votes and control in hands of management.

We have even named its CEO Alan Cohen as one of our ten CEO's that need to go.  This merger should never have been ventured into in the first place.  Even with Finish Line shares up more than 30% at $3.73, its 52-week high is $13.86.  Finish Line stock was north of $10.00 before its mouth became hungrier than its pockets could afford.

Genesco is the real winner here, although you wouldn't know it if you look at the stock today with shares down nearly 20% at $24.50.  UBS (NYSE: UBS) and Finish Line will pay to Genesco an aggregate of $175 million in cash along with a number of Class A shares of Finish Line common stock equal to 12% of the total post-issuance Finish Line outstanding shares of common stock.  If the financial markets were not in disarray for deal financing, we'd probably be noting how the valuations of Genesco are compelling.

Jon C. Ogg
March 3, 2008

Clothing Retailers Wait For Chico's FAS Earnings (CHS, CWTR)

On Tuesday afternoon we’ll get to see earnings out of Chico's FAS Inc. (NYSE: CHS). The estimates for the specialty womens retailer from First Call are $416.93 million in revenues.  Next quarter estimates are $467.74 million in revenues. Estimates for fiscal Jan-2009 are $1.84 billion in revenues.

Analysts have an average price target north of $9.00, in-line with the current share price.  Chico's FAS’ 52-week trading range is $6.70 to $27.94.  This is one that we might not normally cover, but it has been one of the uglier womens retail plays out there.  Even with a near-50% recovery from its 52-week lows, this one is still nearly down by about two-thirds from its highs. 

The short interest on this is huge with roughly 18.8 million shares, so anything looking "not horrible" will probably create a short covering parade.  When this one turns, it will turn fast.  Investors just need to know that they are no longer investing in a growth stock if they are buying stock in Chico's.  Traders will also be watching Coldwater Creek (NASDAQ: CWTR) on this news, as these are the two most compared companies after much of the same target market.

Jon C. Ogg
March 1, 2008

Gap's 'Less-Bad' News Not All Bad (GPS)

Gap, Inc. (NYSE: GPS) is seeing a 5% rise after the ailing casual apparel retailer reported earnings.  The company posted $0.25 EPS with a 5% revenue drop to $4.67 Billion, and First Call estimate was $0.35 EPS on $4.7 Billion in revenues.  For fiscal targets a year out it gave a range of $1.20 to $1.27 EPS, and First Call has estimates of $1.23 EPS.  It looks like the worst part of plummeting earnings may be behind the company, even if the news is not yet great.

Perhaps the driving force rather than the real earnings results was more of the company's keeping costs down, a dividend hike, and a share buyback.  Gap gave word it would repurchase up to another $1 Billion, with about 16% of that coming from Fisher founding family members.  Its annual dividend was also being raised from $0.32 to $0.34.

We still think that the company's best shot here is to divest Old Navy as its worst image brand.  We have noted how it needs to get rid of this pig.  The company's market cap at the close today was $14.6 Billion, and that is one of the few initiatives it can take that would actually make an immediate dent. 

Shares are up 5% at almost $20.50 on relief that things are no longer looking like they just continue to get worse and worse and worse.  This one still has a lot to prove before "it's back" as far as Wall Street and main Street are concerned.  The 52-week trading range is $15.20 to $22.02, and the highs in the late-1990's and early in 2000 were north of $40.00.

Jon C. Ogg
February 28, 2008

Crocs Earnings Reaction Uglier Than Its Shoes (CROX)

Crocs, Inc. (NASDAQ: CROX) has posted its fourth Quarter revenues rose more than 99% to $224.8 Million while its diluted EPS rose more than 73% to $0.45.  First Call had estimates at $207.6 million and $0.44 EPS.

For fiscal December-2008, Crocs reiterated its previously issued growth targets of 50% for the first half, and it expects revenues of approximately $1.16 Billion and net income per diluted share of approximately $2.70.  We show First Call estimates at $1.18 Billion and $2.71 EPS.  That means that the bulls are going to have to hope the company is merely under-promising so it can over-deliver.

Ron Snyder, President and CEO: "...We experienced better than expected sell through of our fall line across men’s, women’s, and children’s in each of our markets. To meet the higher than anticipated orders over the holiday period we delivered a meaningful amount of Mammoths by air-freight, which impacted our gross margin."

If you think we are critical of Crocs shoes being an ugly fad, you should see what we said about OLD NAVY after its president left today. CROX shares closed down 4% today at $32.08 ahead of results, yet shares are down another 12% at $28.25 in after-hours trading.  Its 52-week trading range is $21.68 to $75.21.  That low is from a year or so ago, because over the last couple of months shares only traded as low as $25.28 during the sell-off.

The truth is that this reaction is the initial reaction in after-hours trading.  By the morning, we could even see a recovery if the value investors manage to show any force.  In a slower economy and after a more than 60% cut in the stock price you would expect that at some point even a fickle Wall Street will learn to factor in a lack of upside in apparel fads.  This now trades with a 10.46 forward P/E if its own estimates for 2008 come to fruition.  Even if we think the shoes are ugly, this one is starting to look cheap on valuations if that fad just stabilizes rather than disappears.

Jon C. Ogg
February 19, 2008

Gap Loses OLD NAVY Skipper.... It Should Spin This Dog Off (GPS)

Gap Inc. (NYSE: GPS) is losing its President of its Old Navy brand.  Dawn Robertson, 52, is leaving Gap effective immediately, and Tom Wyatt of the Gap Outlet division will become acting president while a search for a permanent replacement is conducted.  This was said to be a mutual decision.... Do you believe it was mutual, and more importantly does it even matter? 

We don't usually like to bash a brand nor do we like to bash people.  We noted prior management changes were not enough, and this is no different. The problems at Gap and at OLD NAVY were not caused by Dawn Robertson and the new CEO Glenn Murphy has no fault here either.  We panned Paul Pressler as one of our first CEO's THAT NEED TO GO, and all of these officers are inheriting what his regime left behind.  It is very unlikely that the OLD NAVY brand will miss her after 16 months.  For that matter, she probably won't miss it either. 

If any president in corporate America wants to run any brand out there, the chances that it would be OLD NAVY might be as little as 1 in 1000.  This is the cheapie brand for Gap.  Glenn Murphy should take this as an opportunity here.  He is still a new CEO there and frankly he could get away with anything short of a capital crime if it would fix a company and fix a brand.  Gap didn't do well with its more upscale womens fashion line Forth & Towne so it closed it.  But OLD NAVY is so cheap that acts as a mental drag to even a casual apparel store like Gap and Banana Republic. 

We doubt seriously that Gap would jettison its brands or break itself up.  But the one brand that could make a difference is for it to unload its cheapie brand.  It could go out and strike new design contracts for say the 2010 product lines and run as an independent company.  Jim Cramer last year used to say "GAP WILL BE TAKEN PRIVATE IN A YEAR!" before the private equity meltdown happened.  The problem is that Gap's market cap is over $14 Billion as of now, and private equity firms are having a hard time borrowing even a couple billion dollars.  It has also been a dead stock and longer-term shareholders who had gotten used to making 10% and 20% in share appreciation year after year may want more than just an at-market buyout.  We have had this up for review in the Special Situations letter, but it has yet to make the cut.

OLD NAVY in North America generated a same store sales drop of -8% this January, and -10% in January 2007.  The problem isn't the economy, it's that this OLD NAVY brand is complete garbage and barely appeals to the lowest rungs of society.  This brand is so bad that it is extremely difficult not to address it with offensive language.  Go get your new president, but make it a challenge that a CEO or president would actually want.  The job ad could read "Crummy company about to spun-off, needs brand improvement, major stock options package, needs visionary."

Gap was already weak before the September 11, 2001 put another nail in its coffin.  While shares did recover from those lows, the reality is that Gap stock has been dead money for almost 5-years.  We noted long ago about needing a headcount cut and brand revamping.  This would even allow the company to stop wasting its cash on share buybacks when it needs the cash for its brand.  There is an opportunity to jettison its cheapest brand here, and it might actually make a difference to shareholders. 

We are looking mostly at the North American stores for comparison here.  As of November 3, 2007, there were 1,188 domestic and 90 Canadian GAP brand stores.  There were 997 domestic and 65 Canadian OLD NAVY brand stores.  When you consider that BANANA REPUBLIC had 519 location in the U.S. and 30 in Canada, you can see why we would note a potential powerful "unlocking value" here.

Jon C. Ogg
February 19, 2008

Ralph Lauren Relief (RL)

Polo Ralph Lauren Corp. (NYSE: RL) has posted net income of $113 million, which translates into $1.08 EPS for its Q3-2008.  This is up from its net income of $111 million, or $1.03 EPS, in Q3-2007. Revenues grew 11% to $1.27 Billion.  First Call had estimates at $0.77 EPS on revenues of $1.19 Billion.

Ralph Lauren is also giving 2008 forecasts as there is only one quarter left, but the company is also offering preliminary 2009 targets:

• For 2008, it sees low double-digit revenue gains, operating margins to decline by approximately 250 basis points, and sees EPS at the lower end of the range of $3.64 to $3.74 compared to a prior expectation of $3.50 to $3.60.  First Call has estimates at $3.47 EPS.
• For 2009, it projects revenues to increase by a low-to-mid single digit percentages, expects a 38% tax rate, sees roughly 106 million shares outstanding, and is initially setting a range of 2009 EPS at $3.95 to $4.05.  First Call has estimates at $4.31 EPS.

While this is under plan for 2009, this actually is not a major disappointment in the grand scheme of things.  If you are a value manager or a GARP manager, there is ammo for both.  Based on the pre-market price being static, this would generate a current year P/E ratio for 2008 of 16.1 and a forward 2009 P/E ratio of 14.6 at the mid-point of the range.

Shares were initially down on this report, but now shares are indicated slightly higher by 2% at $58.70.  The 52-week trading range is $50.55 to $102.58, so there has already been a full blown market price correction to adjust for a slower growing company here.

Jon C. Ogg
February 6, 2008

Under Armour: GARP or Value Trap? (UA)

Under Armour, Inc. (NYSE: UA) posted its earnings this morning, and some might be breathing a sigh of relief that the stock is only down marginally.  The sporting apparel maker posted Q4-2007 EPS of $0.34 per share on a 29% rise in revenues to $174.8 million.  First Call had estimates pegged at $0.32 EPS on revenues of $173.5 million.

We had already been warned that the company was going to see a ramping up of its ad spending for the first half, and Wall Street understood that this meant a lower bottom line.  Under Armour's guidance for fiscal 2008 is light as it sees revenues of $765 to $775 million.  First Call has estimates at $787.87.  The company is maintaining the stance that its diluted earnings per share will be in a range of $0.03 to $0.05 for the first half of 2008.

Shares had actually indicated slightly higher in pre-market trading, but now shares are down almost 3% at $36.50.  Its 52-week trading range is $25.39 to $73.40, although this only spent two or three days over the last two weeks down under $30.00.

What is interesting is how this has fallen so far from grace after a monumental 2006 rise.  If the company would just meet prior 2008 targets, it would now have a forward P/E ratio of just under 30.  The problem is that it isn't growing as fast as before and it is no secret that all high growth companies either reach the end of the exponential growth or at least mature. 

If you are a growth investor, the GARP (growth at reasonable price) is there.  But the best growth is behind it and all the momentum is a mere memory.  Based on its multiples, its recent performance, its current earnings performance, and more, this also looks more like a value trap than it does a value stock.  The good news on the flip-side of the coin is that it at least looks like most of the worst has been seen.  We'd also note that if the company loses too much value it would make an attractive brand target for another apparel conglomerate that wants another solid core brand under its roof.

Jon C. Ogg
January 31, 2008

Hannah Montana Brand At Risk With Wal-Mart? (DIS, WMT)

A report from the USA Today last night put Wal-Mart Stores (NYSE: WMT) in a partnership with Disney (NYSE: DIS) whereby Wal-Mart will sell more than 140 products based on Disney's famed Hannah Montana teen and child craze.

If you have ever read any of the financial aspects behind the Hannah Montana franchise for Disney, the numbers are pretty big.  If this is 140 products or 500 products, it won't make a difference individually to Wal-Mart because of its endless product line-up and its near-$100 Billion in quarterly sales.  Disney does over $8 Billion per quarter in revenues. 

This Hannah Montana has been reported as not just having sold out shows, but one where parents are pulling teeth out and paying in some cases ridiculous sums of cash to get concert tickets.  Wal-Mart isn't exactly known for brand-luxury even if it is roughly 10% of U.S. retail spending.  Disney better hope this doesn't dilute the franchise too much.  Maybe it already sees an end coming to this craze.

Why does this feel like another teen star or craze is being set up for a future version of "Where Are They Now?"

Jon C. Ogg
January 30, 2008

Ladies Night With Jim Cramer (TJX)

On tonight's MAD MONEY on CNBC, this was actually a Ladies night where he was in front a live audience full of nothing but... ladies.  He discussed the Fed coming in with the emergency cut and how we would likely have seen a 1,000 point drop today (as we noted a 1,000 point drop was likely without an emergency intervention).  He started out with a Q&A session but he he was giving a retail stock pick that is appropriate in this environment.

Cramer noted retail worked today rather than the defensive stock picks because of retailers being hopefully helped by a rate cut all the way out to the end of this year.  In this environment in a serious economic slowdown his retailer pick that may go up regardless of the Fed is TJX Companies (NYSE: TJX) because of the discount stores T.J.Maxx and Marshall's brand.  As these stores discount mid to high-end apparel they showed a positive number in same-store-sales for December when most retail sales were weak.  Cramer also likes the CEO as a transformational CEO that will do even better when the economy is doing better.  It has also bought back $650 million in stock and can buy back $250 million more.

If you have ever gone into one of these stores with your intimate other or on your own, you know what a zoo these can be.  Shares closed up almost 3% at $29.71 today in normal trading and shares were up almost 2% more after Cramer touted this one.  TJX has traded as low as $25.49 and as high as $32.46 over the last 52-weeks.

Jon C. Ogg
January 22, 2008

Liz Claiborne Scores Key Designer, Isaac Mizrahi (LIZ, TGT, WMT)

Liz Clairborne Inc. (NYSE: LIZ) has made a key hire that might get some notice or kudos if it was a different environment.  It appears that Liz has poached away Isaac Mizrahi from Target Corp. (NYSE: TGT).  This line of Isaac Mizrahi will still be available at select target stores and target.com through the end of 2008.

Isaac Mizrahi is actually a trendy brand that has been quite popular, and it may have been one of a few dozen things that had helped Target make inroads in its war against Wal-Mart (NYSE: WMT) on the fashion side.  Speaking of which, they should have done the work to pursue him.

Normally we'd say this might be a great fit for Liz.  Actually we think it is a great fit considering how the performance has been over there.  There's just one small problem.  We are already in a recession and now it seems that the only big question is how deep or how bad it will get. 

Also, as this clothing line is available at Target through the end of the year this will take some time to filter out for Liz.  As every other retailer is in the soup, it's just hard to get excited about anything retail today.

Congratulations Liz, but we'll throw you a party maybe later in the year.

Jon C. Ogg
January 15, 2008

When Cold Weather Can't Even Save Zumiez (ZUMZ)

After perusing the 52-week lows mid-day there was one key standout as the last name on the list: Zumiez (NASDSAQ:ZUMZ). 

Recently this posted a disappointing sales growth of 5.6% on same-store-sales.  Analysts were looking for an 8% gain on average, and this was well under the 12% growth seen in November 2006.  Zumiez isn't ONLY a winter gear apparel company since it sells apparel and skating equipment and more.  But it is thought of by many as a winter sport equipment and apparel company.  The cold weather isn't helping as it is hitting new 52-week lows heading into Christmas.  Maybe a recession is even worse for snowboarders than it is for home sales.

The stock performance has now been bad enough that it had two different class action lawsuits filed against it.  With shares down 5.6% at $22.71, its 52-week trading range before today was $23.78 to $53.99.  This was over $50.00 briefly at an all-time high just at the beginning of October.

It isn't a super expensive stock based upon the easy metrics with consensus estimates at roughly 24-times JAN-2008 EPS targets and around 19-times JAN-2009 EPS targets.  Maybe these estimates are coming way down and the multiple only sounds cheap today but won't be cheap tomorrow.

One of these two scenarios comes to mind: you have to wonder if this is just gravitating toward a market multiple, or if the company has gone from shinola to merely a mediocre store overnight.  There's a third possibility too.  Maybe it's just a grossly oversold stock.

Jon C. Ogg
December 14, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

10 CEO's That Need To Leave in 2008: Finish Line's Alan Cohen (FINL, GCO)

Finish Line (NASDAQ:FINL) is a company in need of a new action team.  Alan Cohen is co-founder, Chairman, and CEO.  All companies reach a certain point where the founder needs to step aside to allow the business to be run by a more capable and more nimble operator.  That time has arrived for Finish Line. 

Mr. Cohen is unlikely to leave entirely since co-founder and as a holder, so if he cares about outside shareholders and cares about his own wealth he will decided to retain the Chairman role and turn the keys over to someone else.

This poorly crafted leveraged buyout of Genesco (NYSE: GCO) was the last big disappointment and the company was going to over-leverage itself if that came about.  Finish Line is using the "material adverse effect" argument because Genesco's results failed to achieve target, although a slowing consumer spending environment may not be considered "material" enough in a current court case.  The fact that Finish Line said the company is now not generating enough cash flow is something it should have considered before it wanted to leverage its books up in what ended up becoming a bidding war.

We even evaluated Finish Line as a potential buyout candidate of its own back in 2006 (prior to Special Situation Newsletter) but decided to close that off the list for a small gain.  It was a good thing we had a change of heart there.  We questioned whether or not management would actually ever sell in the first place, but we didn't expect a leveraged buyout for a more diversified play.

This stock recently traded at 12.75-times FEB-2008 earnings and only at about 8-times the FEB-2009 estimate, although it is quite likely that these estimates do not reflect a slower consumer spending environment.  Earnings estimates have been trimmed lower over the last 60 days.  It also doesn't really consider a potential ongoing case with an even larger potential verdict against the company, although that outcome won't be known for a while.  Our thesis for Alan Cohen is not subject to the verdict whether it wins or loses against Genesco.

The company has been a habitual spotty earnings performer.  At the end of a day when you are merely a retailer that caters to sport shoes and apparel that has to be continually replaced, how many excuses are there for a loss of more than two-thirds of your stock value.  The major growth days as far as numbers of new stor opportunities are somewhat behind the company, although some of that may be because there are more than enough sporting shoes and apparel stores around in major cities.  This maturity is another reason the company needs some fresh blood to help navigate through choppier waters than when this was a major growth story.

Shares are up from recent lows even after it warned of a loss, but with a history of spotty earnings performance compared to estimates it is just more of the same.  Shareholders are also confused by the dual class structure of the stock with there being more than 8-times the A-shares as B-shares and the B-shares have a ten-to-one ratio for voting.

With the structure of those B-Shares affecting the vote, Mr. Cohen doesn't have to listen to shareholders and doesn't have to do the right thing.  In fact, he could hang on for another decade if he wants to regardless of share performance.  An activist investor would be a big help to Finish Line, but any activist would know that their entire efforts would likely be falling on deaf ears.

GUIDELINES FOR OUR CEO's TO GO SELECTION

Jon C. Ogg
December 12, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Crocston & New Crocs City (CROX)

This morning Crocs, Inc. (NASDAQ:CROX) announced it will open retail stores in Boston and New York City on Friday, November 23rd, its first East Coast locations.

As an extra incentive to come buy at the stores, Crocs will give away a CD featuring up-and-coming artists to the first 3,000 customers who try on a pair of newly launched YOU by Crocs™ shoes at each location.  Crocs already has more than 25 company stores worldwide, but here are the new locations:

• The new Boston Crocs retail store is located in the historic Haymarket area at Faneuil Hall.
• The New York City Crocs retail store is opening at 270 Columbus Avenue.

Pure play stores like this can be phenomenal successes, and they can be the perfect tell for when a trend is at the end.  That may not be the case yet, but it's days of massively beating and exceeding guidance have been deemed as behind it if you have watched the stock fall from $75.00 to under $40.00 after a meteoric rise.  For some reason I am not that impressed here, and with another 3% drop pre-market to $37.36 it doesn't look like Wall Street is that impressed either.

Jon C. Ogg
November 21, 2007

Endeavor's 'American Apparel' Buyout Revised Higher (EDA)

Endeavor Acquisition Corp. (Amex: EDA) has announced an amended and restated merger agreement with American Apparel, the blank check company's acquisition target.

American Apparel shareholder Dov Charney will now receive a total of 37,258,065 shares of Endeavor, an increase of 5 million shares which are still subject to a 3-year lock-up.  The maximum level of American Apparel net debt at the merger closing date has been raised to $150 million, up from the $110 million ceiling in the original agreement.  Mr. Charney has entered into a 3-year employment agreement at $750,000 per year with up to a 150% performance based bonus and a long-term performance bonus of up to 300%; and this is a change from the initial $1 salary he was set to receive.   Endeavor will also increase the employee stock option and stock plans to 7.71 million shares from 2.71 million shares in the original agreement.  The additional shares for Mr. Charney will maintain his approximate 55% ownership position in the pro forma company as intended per the originally proposed transaction.

The reasons are pretty easy to see.  The company has 20 new store openings planned.  But the growth numbers were big here.  It posted third quarter same store sales growth at 27%. Its first 9-months EBITDA looks to exceed $40 million, which was its goal for all of 2007. As of October 31, 2007, American Apparel operated 166 retail stores in 13 countries.

The special meeting of stockholders to consider the transaction is expected to be held Wednesday, December 12, 2007.  You can guess that the shareholders will approve this transaction.  Endeavor's closing price was $12.32 yesterday, and the 52-week range is $7.32 to $13.15.

Jon C. Ogg
November 8, 2007

Jon Ogg produces the Special Situation Investing Newsletter; he does not own securities in the companies he covers.

Is Fur-Free bebe stores Socially Responsible Investing? (BEBE)

bebe Stores, Inc. (NASDAQ:BEBE) has announced that it will discontinue buying product with animal fur starting January 2008.  CEO, Gregory Scott, said "........bebe has gone to great lengths in working with its vendors to ensure that only fur created as a byproduct could be used. Over this same period of time, we are proud to say that we have dramatically reduced the use of animal fur to less than 3% of our product offering and now look forward to completely eliminating animal fur from our orders beginning in January 2008."

Does this qualify for a socially responsible investment? And is it socially responsible if the website products are "dangerously sexy 2007" and "sexy sweater dresses"? 

The only thing that 24/7 Wall St. wants to ask Mr. Scott is this: DO YOU WEAR SUEDE OR LEATHER SHOES?

Jon C. Ogg
November 1, 2007

CROCS Traders Send Shares To Everglades (CROX)

Shares of CROCS Inc. (NASDAQ:CROX) are getting hammered in after-hours trading.  The highly successful maker of ugly shoes that everyone still loves posted earnings:

• Revenues up 130% to $256.3 million (consensus $258.4 M);
• EPS rose more than 100% from $0.27 in Q3-06 to $0.66 (consensus $0.63);
• CROCS is also raising guidance for 2007 to $820 million to $830 million revenues ($835 million is consensus) and diluted earnings per share at $1.94 to $1.98 ($1.97 is consensus).

CROCS is introducing guidance for fiscal 2008 revenues and EPS growth of 35% to 40%.  If we took a 37.5% mid-point and used the mid-pont for 2007 estimates as the benchmark:

• 2008 EPS $2.71 EPS (consensus is $2.56)
• 2008 revenues of $1.134.375 Billion (consensus is $1.13 Billion).

Investors have been used to consistent "handily beating estimates and drastically raised guidance" on the shoe (and now apparel) maker.  There is nothing wrong with the numbers here per se, but after a 300% stock run it was only a matter of time before investors would start to sell even the good news or when the good news would be deemed not good enough.

CROX is trading down 16% in after-hours around $62.50, and the 52-week trading range is $17.63 to $73.75.  This was one of the stocks that closed on a new all-time high close today, and we noted that it was likely one of the mutual fund window dressing stocks as today market the year-end for most mutual funds. 

Based upon the cult following and the core audience, it would not be crazy to think that by tomorrow morning some of the analyst notes may be deeming the guidance as overly conservative despite a revenue number that some will deem as light.  We'll know soon enough.

Jon C. Ogg
October 31, 2007

Under Armour Suiting Up For Earnings (UA, NKE)

On Tuesday morning (Oct. 30), we'll get the awaited earnings report from Under Armour (NYSE:UA).  Q3 is expected to see $0.34 EPS on $190.95 million revenues according to First Call's consensus estimates; and next quarter is also expected to see $0.34 EPS but on revenues of $179.3 million.  If the company offers 2008 guidance, consensus appears to be $1.31 EPS on $$788.5 million in revenues (with a wide range on both EPS & Revenues).  The WSJ has recently noted competition heating up with Nike (NKE)

The key metric question may boil down to its stance on what it sees for 2008.  It is obvious that warm weather from September through October, and this would logically create some concerns for the company's fourth quarter.  That is our take, and it hasn't been readily addressed by Wall Street besides a UBS downgrade in September over weather playing a part (which was discussed less negatively last week upon valuation).

Late options trading on Monday appears to have traders braced for a move of up to roughly $5.00 in either direction.  The average analyst price target is between $65 and $66, depending on your source.  Its chart had been weak up until the last few days, but this can be quite volatile around news events and subject to large price swings.

In late day trading, Under Armour shares were down over 2% at $58.11, and the 52-week trading range is $41.37 to $73.40.  Under Armour's market cap is currently about $2.8 Billion.

Jon C. Ogg
October 31, 2007

Heelys Still Warning & New Lows (HLYS)

Heelys, Inc. (NASDAQ:HLYS) is being punished, again, in after-hours trading because of an earnings warning.  The Company currently expects net sales for the third quarter to be approximately $49 million compared to its previous guidance range of $55 to $58 million, and earnings per diluted share for the third quarter to be in the range of $0.22 to $0.23 versus the prior expectation of $0.28 to $0.30.

These CEO comments pretty much say it all.  Mike Staffaroni, President & CEP said, “Throughout the third quarter we took a number of steps to reduce the amount of inventory in our current domestic distribution channels, including increasing our national advertising and providing additional markdown assistance. While we appear to have made some important progress, the difficult retail environment over the past several months resulted in higher than anticipated order cancellations, increased promotional activity and rescheduled shipments, all of which negatively impacted our net sales and earnings. We continue to believe in the long-term prospects of our brand and products; however over the near-term, we expect that our business will remain challenging.”

It looks like the new video game inspired shoes aren't going to help it yet.  Shares are now down 10% at $7.55 in after-hours trading and it has a $7.65 to $40.09 trading range since its IPO.  This looks like a new all-time low if these levels hold. 

Jon C. Ogg
October 24, 2007

Heelys Blows The Tires Off (HLYS)

If you've ever heard shoes referred to "wheels" in slang that isn't really slang for Heelys Inc. (NASDAQ:HLYS), which makes the wheeled shoes for kids.  This was a fairly hot IPO for a brief period and there was some cool product buzz.  Unfortunately it was a flameout and the stock imploded after coming public.  Inventories had been up and previous guidance wasn't exactly what investors in hot post-IPO's look for.

Today, the company has launched its 'non-wheeled' line of shoes.  So these are just regular shoes.  Heelys is already in apparel, bags and accessories, so this is not exactly the first 'first' for the company.  This launch is called the Gamer by Heelys. The new Heelys Gamer shoe embraces a favorite American pastime by featuring a simulated game controller on the outsole of the shoe.  This was demonstrated in July at the World Series of Video Games.  This will hit stores in November for pre-holiday sales.  If you want to see the demo you can see the design at http://www.heelysgamer.com.

Shares are up 8% pre-market at $10.60.  The trading range since the IPO has been $7.65 to $40.09. As of the end of September, Heelys had over 2.3 million shares listed in its short interest (about 10 days to cover).
Barron's also pointed to risks in this early on.

Jon C. Ogg
October 17, 2007

lululemon Feels the Yoga Love (LULU)

lululemon athletica, Inc. (NASDAQ:LULU) is seeing a surge in shares pre-market today.  The Yoga apparel and class operator raised its prior guidance.  lulu said its comparable store sales are now expected to show percentage growth in the mid-30's over the same period last year, above the previous guidance of growth in the mid to high teens.

lulu's revised guidance is attributable primarily to strong sales volumes.  Interestingly enough it also said that an additional benefit came from the impact on sales of a strengthening Canadian dollar against the U.S. dollar. On a constant dollar basis, the revised guidance translates into a mid-20's percentage increase over 2006. Even though the increase in sales is expected to be partially offset by the currency impact on SG&A costs incurred in Canada, the Company expects to exceed its previous guidance of $0.05 to $0.06 EPS for the third quarter.

LULU shares are trading up over 9% at $45.00 in pre-market trading, still under the $48.58 highs since the company's stellar IPO this morning.

• Initial Research Calls on LULU;
• Cramer thinks its the next hot apparel company;
• Its first earnings report.

Jon C. Ogg
October 16, 2007

lululemon Results Strong, But Looks Like Traders Wanted More (LULU)

Diluted earnings per share were $0.07 on net income of $5.1 million (compared to $0.03 on net income of $1.9 million in Q2 2006). Net revenue increased 80% to $58.7 million (from $32.5 million in 2006 Q2).

Income from operations increased 202% to $9.8 million, or 17% of revenues (compared to $3.2 million, or 10% of revenues, in Q2 2006).  Net revenue from corporate-owned stores also increased 98% to $53.1 million compared to $26.8 million for the second quarter of fiscal 2006, with comparable store sales growth of 30%.  Gross profit as a percentage of revenue rose 430 basis points to approximately 53% of net revenue from 49% in Q2 2006.

Unfortunately, these estimates are hard to compare.  The coverage universe from the underwriters just opened up last week, as you saw in our analyst initiations of LULU.  Shares closed up 2.1% at $36.66 in normal trading, about 6% off of its post-IPO highs.  But in after-hours activity, shares are trading down over 7% to under $34.00 in the initial reaction.  These fresh companies are often hard to cover with estimates and using real targets right out of the chute. 

Apparently these are not being deemed as enough above what the street wanted, but the real indications will come from the trading levels in pre-market trading tomorrow.  It makes you wonder if Cramer will still think of this as "The Next Under Armour" that he discussed last month.

Jon C. Ogg
September 10, 2007

Jon Ogg produces the 24/7 Wall St. SPECIAL SITUATION INVESTING NEWSLETTER; he does not own securities in the companies he covers.

Cramer's Retail & Apparel Calls On The Fed (PVH, PERY, RL, DLTR, GPS, AEO)

On tonight's Mad Money on CNBC, Jim Cramer said he is adamant of a RATE CUT from the Federal Reserve and sticking his head out waiting for it.  He still thinks the way to play this is by being in best of breed and solid retail stocks, particularly since this is FASHION WEEK.  He has one play he thinks is a big buy, but there are also a couple retail stocks in fashion and apparel that you should avoid.

The one Cramer loves and thinks you should own right now is Phillips-Van Heusen (NYSE:PVH), which owns Calvin Klein.  That isn't the only brand and isn't the only good brand.  It licenses Kenneth Cole, DKNY, Joseph Abboud, and has IZOD, Bass, Geoffrey Beene.  He thinks this may be immune from missing estimates and will grow from the outside of the US sales.  It also has 725 outlet stores it sells through.  PVH rose 1.5% to $56.00 after the Cramer call, but shares were down 1.9% in normal trading and closed at $55.18 in normal trading.

A call-in during the first 'avoid segment' was actually from an overstock retail specialist, and Cramer agreed that there is major discounting and overstocking going on in apparel right now.  Cramer still thinks the way to key off of good retailers is by gaging the Fed ahead of rate cuts. In the call-in segment he was positive on Gap (NYSE:GPS), Dollar Tree (NASDAQ:DLTR), and American Eagle Outfitters (NYSE:AEO).

CRAMER'S AVOID LIST FOR NOW

Perry Ellis (NASDAQ:PERY) is a fairly unfashionable label that blew away earnings, but the quality of earnings was a beat because of cost cuts and they are a mid-tier fashion brand.  This is also the most at risk if Cramer is wrong on the rate cuts, and he's concerned about Perry Eliis' future.  It also gives no dividend and has no share buyback plan.

Ralph Lauren (NYSE:RL) is a best of breed clothier, and Citigroup just started it as a Buy this week.  On August 8 the earnings miss punished the stock after an earnings warning.  He said he gave the management the benefit of the doubt right before the retail stock slide happened.  Tonight Jim Cramer is saying now that he cannot recommend this one now, and he said he's sitting on the sidelines now.  Blowing a quarter means you have to weigh the risk/reward a quarter later to make sure this isn't a one time event.

Jon C. Ogg
September 5, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the 24/7 Wall St. SPECIAL SITUATION INVESTING NEWSLETTER and he does not own securities in the companies he covers.

lululemon's Quiet-Period Ends: Research Initiations (LULU)

lululemon athletica Inc. (NASDAQ:LULU) has been quite a performer based on its recent IPO performance. The indicated range was $15.00 to $17.00, but the company sold 18.2 million shares at $18.00 per share.  Since the IPO, shares have traded as high as $38.85.

This morning, we are getting to see the analyst call initiations as the quiet-period has ended:

Goldman Sachs and Merrill Lynch were the lead underwriters.  Goldman Sachs initiated coverage with a "Buy" rating and a $40.00 target.  Merrill Lynch has started coverage with a Neutral rating.

Here are the co-manager calls and outside calls:

CIBC started coverage with an "Outperform" rating.

Wachovia started it with a "Market Perform" rating.

William Blair started coverage with an "Outperform" rating and an Aggressive Growth company profile.  Analyst Sharon Zackfia estimated that the company, which retails its yoga-inspired athletic apparel through company-owned boutique-style stores, would earn $0.29 per share in 2007, $0.46 per share in 2008, and $0.71 per share in 2009.

RBC Capital Markets, which was not in the underwriting and thus exempt from the quiet period rules, started coverage all the way back at the end of July with an Outperform rating.  Shares closed at $28.00 that day, on its IPO day.

Other co-managers were UBS and Thomas Weisel, and we haven't seen those reports yet.

If you will recall, it was just about a month ago that Jim Cramer noted this one as having some of the same characteristics of under Armour (NYSE:UA).  Shares had closed at $31.00 that day, and shares are down 2% at $34.15 on the day, now.  it seems that based on the mixed coverage and on the targets that investors may be waiting for this one to cool down before they chase it further.

Last month's short interest in August was listed as 2.011 million shares.  The company said it will report earnings on Monday, September 10, 2007, after the market close.

Jon C. Ogg
September 5, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the Special Situation Investing Newsletter and he does not own securities in the companies he covers.

Crocs: New Clothing Line Equals New Highs For Its Stock

Crocs. Inc. (NASDAQ:CROX) is trading up at a new all-time high in pre-market activity as the shoe maker is unveiling new product lines today.  The company is using its Crocslite(TM) material for new garments.

The company is unveiling new short sleeve and long sleeve tees for $36 to $40 MSRP.  It is also rolling out new long sleeve and short sleeve woven shirts ith a $54 to $58 MSRP.  The new line for kids will be shorts, pants, and skirts that can all be accessorized and customized with the Jibbitz charms.

Crocs is debuting these new lines at MAGIC Marketplace in Las Vegas this week, and they will be on sale in late October for the holiday sales.  The company said it will also introduce a spring 2008 apparel line for a wider use of its Crocslite(TM) materials.

Shares are trading up 5% at $62.00 in pre-market trading.  The prior high was $61.35.

Jon C. Ogg
August 27, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Gapping Gap Earnings & Buybacks (GPS)

Gap Inc. (NYSE:GPS) reported $0.21 EPS (before a $0.02 charge) on revenues of $3.69 Billion, and First Call estimates were $0.19 EPS on $3.7 Billion in revenues.  Keep in mind that the company's revenues were already known.

GUIDANCE: The company revised its guidance for fiscal year 2007 diluted earnings per share on a GAAP basis to $0.83 to $0.88 from its previous guidance of $0.76 to $0.86. The company also revised its guidance for fiscal year 2007 diluted earnings per share, excluding expenses associated with the discontinued operation of Forth & Towne and the company's cost reduction initiatives, to $0.90 to $0.95, compared to its previous guidance of $0.80 to $0.90.

BUYBACKS, PLUS MORE BUYBACKS: During the second quarter, the company repurchased 11 million shares for $200 million, thereby completing a $750 million share repurchase authorization which was announced in August 2006.  the company announced that its board of directors authorized an additional $1.5 billion share repurchase program, and that it has entered into purchase agreements with individual members of the Fisher family whose ownership represents approximately 17 percent of the company's outstanding shares. The company expects that about $250 million (approximately 17 percent) of the $1.5 billion share repurchase program will be purchased from these Fisher family members.

MARGIN, TAX RATES, & GROWTH: The effective tax rate was 37 percent for the second quarter of 2007. The company continues to expect the effective tax rate will be about 39 percent for full year 2007. Gross margin of 34.3 percent increased 1.3 points in the second quarter compared to the prior year. Operating margin for the second quarter was 6.1 percent. The company reaffirmed that it expects operating margin for fiscal year 2007 to be in the high single-digits.  For the first half of fiscal year 2007, the company opened 73 store locations, closed 61 store locations and square footage increased 1 percent. The company reaffirmed that it expects to open 30 store locations on a net basis for fiscal year 2007. This includes about 230 store openings, weighted toward Old Navy, and about 200 closures, weighted toward Gap brand.

This is Glenn Murphy's first quarterly report as CEO.  Gap shares are up almost 3% to $17.90 in after-hours trading and that is after closing down 0.5% at $17.40 in regular trading.

Jon C. Ogg
August 23, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

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