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No. of Recommendations: 2
I spent some time looking at the company, and did purchase it last week. So thanks for the idea.

Here are some notes I took:

We initiated a 1% portfolio position last week, with a cost of $7.10. The 3Q17 earnings were terrible, and it is possible that is reflected in a stock price that was down from $10.95 on August 1, 2017.

The basic thesis is buying a retailer at a low P/E, accompanied by a slight insider purchase. I am concerned with debt levels, although the line was extended until 2022. With a P/E of < 10 we don’t need earnings growth, but we certainly need solvency, and hence something to watch.

Yield is 9.45% ($0.60). Earnings expected at $0.95 which would give a P/E of 6.68X. Dividend pay-out has averaged 44.0% for the last 10 years. The payout ratio was 58% in F2015, and 68% in F2016. Dividend payout ratio expected to be 63% and 60% for F2017 and F2018 respectively. ROE has averaged 12.45% for the last 10 years. ROE was 7.7% in F2015, and 8.2% in F2016. ROE is expected to be 10.0% for F2017 and 10.0% for F2018. ROTC has averaged 9.19% for the last 10 years. ROTC was 6.2% in F2015, and 8.1% in F2016. ROTC is expected to be 9.0% for F2017 and 9.0% for F2018. Average P/E for the last 10 years has been 15.55X. Projected eps for F2018 is $1.00 which equates to a forward P/E of 6.35X. VL gives it ‘C++’ financial strength, and a Safety rating of 4. VL projects a price between $15 - $25 between 2020 – 2022 (10/27/17).

Shares outstanding projected to be 21,760 at December 31, 2017.

Edgar is showing that this is 100% controlled by institutions, but I find that hard to believe. I’m guessing an error on their part, since this is nearly a micro-cap.

Expects same store sales to be in the single-digit range. Same store sales increased 3.1% during 4th quarter of 2016.

“Given the challenging and competitive retail environment, we are pleased to have retained a significant portion of the market share gains that we achieved following last year’s competitor store closures in our markets. While our third quarter same store sales declined from the prior year, we achieved two-year stacked quarterly same store sales growth for the period of 3.8%. For the third quarter, same store sales in our hardgoods category declined in the mid-single-digit range, reflecting the continued reduced demand for firearm-related products, and same store sales in our apparel and footwear categories were slightly down. Despite a highly promotional retail environment, we are also pleased to have grown merchandise margins as we benefited from a shift in our product mix.”

During the fiscal 2017 third quarter, pursuant to its share repurchase program, the Company repurchased 666,609 shares of its common stock for a total expenditure of $6.8 million. For the year-to-date period through October 1, 2017, the Company repurchased 677,109 shares of its common stock for a total expenditure of $6.9 million.

The cost per share of the buyback is $10.19. That is quite a premium to today’s price.

Conference Call Quotes and Notes:


“10% of the Sports Authority locations that have closed in our market now reopened as Dick's stores. Those factors, along with the challenging promotional retail environment and comparative weakness in our firearm-related business, pressure the top line during the third quarter.”

“We experienced a low mid-single-digit decrease in the number of customer transactions and a low single-digit increase in our average sales during the third quarter versus the prior year period.”

“Turning to our balance sheet. Our chain-wide inventory was $309.3 million at the end of the third quarter, up 6.7% from the third quarter of fiscal 2016 when chain-wide inventory was down 9.0% from the third quarter of fiscal 2015. As we discussed previously, the increase in inventory primarily reflects our strategic decision to enhance in-stock inventory levels for key product areas to meet anticipated demand following the market share gains we have achieved over the past year. We feel comfortable with our inventory assortments heading into the winter and holiday shopping season.”

“Looking at our capital spending. Our CapEx, excluding noncash acquisitions, totaled $11.4 million for the first 9 months of fiscal 2017, primarily reflecting investment in store-related remodeling and new stores, IT systems and our distribution center. We expect capital expenditures for fiscal 2017, excluding noncash acquisition, for approximately $16 million to $20 million.”

“Our long-term revolving credit borrowings at the end of the third quarter were $46.4 million, which is up from $22.9 million at the end of the third quarter last year, and up from $10 million at the end of fiscal 2016. Our higher debt levels primarily reflects the funding of inventory purchases to support anticipated demand as a result of the competitive closures in our markets.”

“Our e-commerce business is continuing to grow nicely. It is -- we continue to evolve it, and I mean our goal, obviously, like many, and certainly ours, is to grow it and make sure it ultimately is accretive to our business. We're continuing to invest in the business including website efficiency, advanced search functionality, enhanced check out and other capabilities. The sales trends have been positive in e-commerce and -- but the profitability is clearly not material to our -- wasn't material to our 2016 financials and certainly not material to our 2017 financials. While
we anticipate a healthy improvement in e-commerce sales from the prior year, we still don't anticipate e-commerce to be material to our 2017 sales or profitability. We continue to test and evolve the e-commerce business model, and hopefully, in addition to being accretive, just trying to make sure that we're providing a meaningful shopping channel for our customers.”



Other Notes:

I find the trading from director Honeycutt to be unusual. Hopefully he is a good trader as he bought not too long ago. He seems to buy and sell large amounts of shares, and so far with success. www.form4oracle.com
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