Cost Plus (Nasdaq:CPWM) took another hit recently when Zacks Investment Research reiterated its 'sell' rating on the stock, reducing the target price from $2 to $1.
This latest kick in the groin came just days after the Oakland-based retailer posted a greater-than-expected $26.6 million second quarter loss and shares reached a (then) all-time low of $1.50. (Proving that records are made to be broken, Cost Plus shares have since dipped below $1.30.)
What's interesting, however, is that overall opinion on CPWM remains relatively neutral, as, according to The Financial Times, all 11 analysts that cover the stock currently recommend holding.
Failing to See the Iceberg
In fact, before the company's ill-fated earnings announcement on Aug. 22, Claire Gallacher, an analyst with Caris & Co., actually rated Cost Plus 'Above Average', despite an equity decline of better than 60% since Jan 2.
What's more, in the past year, analyst expectations for Cost Plus have, on the whole, improved. This is an amazing show of optimism given that the stock price has plummeted by almost 96% since 2005. (For more on analyst expectations, read our related article Analyst Recommendations: Do Sell Ratings Exist?)
How empty is the Cost Plus glass right now? When competitor Pier 1 Imports (NYSE:PIR) made an $88 million bid for the company back on June 9, Pier 1 shares dropped by 21% on the news, recovering only slightly a week later when that offer was rejected by the Cost Plus board of directors.
True, the continuing problems in the real estate market have produced choppy seas for all those in the housewares retail sector. KeyBanc Capital Markets initiated coverage on Bed Bath & Beyond (Nasdaq:BBBY) on August 5 and immediately assigned it a rating of 'underweight', noting that, "macro headwinds are expected to have a negative impact on its earnings and comps going forward." Pier One shares reached a 14-year low on July 15. And Williams-Sonoma (NYSE:WSM) has seen its share price regress by more than 25% this year as well.
But at what point do Cost Plus analysts begin noticing the rising water levels and make for the lifeboats?
Rescue at Sea?
That said, Cost Plus does have its bright spots. Net sales for the second quarter of fiscal year 2008 were up 5.6% from the second quarter of FY 2007 and same store sales improved by 1.2%, thanks in large part to a 3.8% increase in customer traffic during that period. Barry Feld, Cost Plus president and CEO, said the company has scaled back its expansion plans and will, instead, continue to tightly control capital spending.
In January, Cost Plus approved a plan to exit eight underperforming markets, close 18 existing stores and reduce its corporate workforce by approximately 10%.
Better yet, recent evidence seems to suggest that, perhaps, the worst of the storm is over for household retailers.
Despite reporting a 223% decline in fourth quarter profits on Aug. 26, Tuesday Morning Corp. (Nasdaq:TUES) nonetheless beat analyst expectations, resulting in a 4.0% rise in share price. Imagine what would have happened had Tuesday Morning's profits been down a mere 123%? Why, the euphoria may have reached dotcom mania proportions.
Still, while it is certainly desirable to buy a stock at its low, get married just once and floss after every meal, the reality is that such things are often easier said than done. Has Cost Plus reached its low? Maybe so, but investors would be wise to wait for signs of life before investing a lot of time and money in its resuscitation - no matter what the analysts think.
To learn more about picking investments in this sector, read Analyzing Retail Stocks.
Stock AnalysisJ.C. Penney is without a doubt turning itself around, but that doesn't guarantee the stock will respond immediately.
Stock AnalysisA summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
Options & FuturesInvesting during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
Investing BasicsHeld onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
EconomicsWill remaining calm and staying long present significant risks to your investment health?
Stock AnalysisIs DKS a bargain here?
Investing NewsA third of Americans use an AT&T mobile phone. How did it evolve from a state-sponsored monopoly, though antitrust and a technological revolution?
Stock AnalysisHome Depot has outperformed the market by a wide margin in the last 12 months. Is this sustainable?
Stock AnalysisYelp investors have had reason to be happy recently. Will the good spirits last?
Stock AnalysisWalmart is enjoying a short-term rally. Is it sustainable? Is Amazon still a better bet?
When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>