American Greetings Corp (NYSE:AM)

TheResurrection (90.29) Submitted: 9/13/2011 2:39:11 AM : Start Price: $19.40 AM Score: +39.18

American Greetings, AM, is a company with an obsolete product. The company sells greeting cards and related supplies such as wrapping paper and gift bags. The greeting card product must eventually lose out to the online delivery of such cards. How much wrapping paper does it take to wrap an ebay gift card, an mp-3 or a Netflix subscription? These cards and wrapped gift must depend on the cheap service available through the US Postal service, but the USPS’s financial woes will cause USPS to raise service rates, reduce services offered or both. This combination of obsolete product and obsolete product delivery will limit sales of physical cards, wrapping paper and stationary.AM has an internet card subsidiary, Blue Mountain Cards to preserve some revenue as consumers move from physical to online delivery of cards. This business has a very low barrier to entry and one can easily imagine the effect of “Google Cards” or “iCards” on the Blue Mountain Card business.AM has a limited upside. AM’s revenues have been stagnant for 5 years. AM has managed to grow profits by reducing material, labor and marketing costs but there is a limit to how far these can be cut before perceived product quality is affected. The upside on AM is limited by their recently completed systems refresh which has yet to be reflected in the balance sheet. The CEO has said that the systems refresh cost will be lumpy, which I assume to mean it will be shown as a one-time item against profits.Disclosure: No position at this time.