Christopher & Banks Corp (CBK)

Overvalued compared to industry. Earnings prospects are tenuous at best.

New generation coming in, will not wear these types of clothes, sorry CBK, I use to own you to, made some money off of you, now im turning on you.

I have just started researching this company. I became interested because it is a favorite of both my wife and many of her peers. When I shop there (for Christmas and birthday gifts for my wife) the service is helpful and friendly, there appear to be many other shoppers, and the merchandise is attractive.

When I first looked at the key statistics in Yahoo! Finance, I was presently surprized that the company has no debt and lots of cash (in fact, at one point it looked like at its lowest market cap it was trading at about the value of its cash on hand but unfortunately it has appreciated since then), is profitable, and it pays a decent dividend now.

I have just started to read its latest 10K and so far am comfortable with its business plans. It is doing the right things to support future growth (i.e. upgrading its computer system, adding some inventory tracking and predicting software, expanding its buyer supplier networks, etc.). It is suffering along with all other retailers.

At the present time, it markets to women of the baby boomer generation, which is a large and affuent demographic group, thus ensuring a fairly good market segment. However, as more and more of this group retire, their fixed incomes may or may not support the same level of spending. The 10K did not mention any plans to expand its marketing to other demographic groups.

The management appear to be conservative and seasoned (although there have been some recent changes).

I believe that the company is worth more now than its present market cap of $155M. With a P/B of only 0.67 it seems to present the classic Graham value stock (where one can buy shares for less than its liquidation value--it carries no goodwill and little intangible assets on its balance sheet). The big question mark is its future sales. Sales fell in the last quarter compared to the same period last year. How long will this economic climate affect sales? I don't know. However, with a current ratio over 3, shareholder equity greater than the market cap (shareholder equity is about 72% of assets and P/B of 67%), and free cash flow positive, this looks like a company that can weather a protracted recession.

Tommorrow's (4/9) conference call should restore confidence in the company's financial position. While the earnings will be lighter than the previous periods due to macro economic issues, the company has plenty of cash/investments to ride through this rough patch.

The ARS issue should be mentioned tomorrow as well - I expect management to note that the failed auctions were a temporary condition.

It's going to be a slow climb back to 2006 prices, but it should get there in 2-3 years.

CBK has been beaten down enough. It will recover.

Depressed price due to overselling. Entire industry is down. Once the economy turns watch this one bounce back. Women love this store and the stock has a pretty good div. to boot. It's near the 42 week low. I'm getting in and you should to. Look for this to bounce back up to $16 by the end of 1st quarter 2009.

The price is right on this stock now. This store has great selection and when I am shopping there the women often aren't buying one shirt or pair of pants. They are buying wardrobes. One lady I overheard say she comes twice a year because she has to drive so far, but it's worth it. From the look of it I was glad I wasn't buying her stack of stuff. (But I am buying this stock.)

The ladies love to shop this store!

beaten down, ZERO debt, healthy cash flow and good dividend

Women love this store for quality, price & great sales.

Has suffered some bad times, but will bounce back

Recently, stock bounced off lower 5-yr trend line. I don't love their clothes but my mom does, and she's the target market.

Great clothing line for spring fasions.

Retailer's price seems to have bottomed out and back on the upward trend.

Christopher and Banks is a specialty retailer operating under the Christopher and Banks, C.J. Banks, and Acorn names. Christopher and Banks and C.J Banks stores offer assortments of sportswear and sweaters whereas Acorn stores offer upscale women’s fashions along with complementary jewelry and accessories. The company operates 524 Christopher and Banks, 218 C.J Banks and 37 Acorn stores across U.S.

Many U.S retailers target baby boomers, which today form 29% of the U.S population. With more disposable income and longer life spans, women from baby boomers generation outpace average women apparel spending by 13%. This paints a good picture about the company, which targets female baby boomers. Yet, third quarter performance was mediocre, as novelty and embroidered assortments did not work well for the company. However, management has identified the earlier missteps and will offer more cotton rich and casual assortments for 2007.

Further, the company plans to open 80 new stores in 2007. Majority of the openings are dedicated to C.J Banks as management senses an opportunity to open more stores in areas where these stores already have a strong brand presence. C.J banks, which contributes good percentage to overall revenues, has shown decent performance, so far, in this fiscal. Overall, the company has been able to achieve double-digit revenue growth over the years.

Looking at the merchandising initiatives, CBK Sport line will be launched in 150 stores in March 2007. The company is upbeat on travel knits and expanded its assortment from 20% to 40% of the store base. Moreover, Jacket business, where the company wants to expand its offerings has been a star performer. Further, the company is planning to upgrade its point of sale system, which will bring in efficiencies in their inventory management. Considering all these factors, the scrip looks good enough to bank on.

CS5 - same store sales disappointing in October. Dropped by select service which makes them more interesting to me. Sept same store sales were good. Changing merchandise may have hurt them. PE a premium to market, holiday coming up probably will rebound. If I end this pick I will monitor it with help from Clark on my ended picks.

Chistopher & Banks (CBK)
$28.14

Q4:2006 earnings report April 5, 2006: TTM $0.84
Trading range between April 5, 2006 and June 20, 2006 was $23.31 and $29.10. The PE range was 27.75 and 34.64

Q1:2007 earnings report June 20, 2006
** Net income $0.39 compared to $0.26 last year
** New TTM $0.97
** Trading range between June 20, 2006 and September 19, 2006 was $23.35 and $29.90: The PE range was 24.07 and 30.82

Q2:2007 Earnings report September 19, 2006
** Net income per share $0.21 vs $0.16
** New TTM $1.02
** Trading range between September 19, 2006 and October 19, 2006: $27.95 and $31.25: PE range 27.40 and 30.64.
** $126 million in cash and no debt
** Diluted share count 38,049,065

The Company operates 753 stores in 45 states, including 518 Christopher & Banks stores, 205 C.J. Banks stores and 30 Acorn stores. The Company’s Christopher & Banks stores offer distinctive fashions featuring exclusively designed, coordinated assortments of sportswear and sweaters in sizes four to 16. The Company’s C.J. Banks stores offer similar assortments of women’s specialty apparel in sizes 14W and up. The Company’s Acorn stores offer upscale women’s fashions along with complementary jewelry and accessories under private and branded labels.
Thesis:

The company is growing earnings at a very healthy pace this year. They have 753 stores in 45 states listed above by chain. The company believes they can open 1300+ stores. C.J. Banks targets women that require larger sizes. With a growing obesity problem in the US this store could be a growth driver for the company. Women who are larger also want to have fashionable clothes and C.J. Banks is trying to satisfy that demand. The Acorn stores sell apparel, jewelry and accessories targeting a more affluent consumer and could be another excellent growth driver. But it is too early to tell for sure.

They have only 26 stores in 14 states. The more affluent customers are unlikely to stop spending when the economy is weak or be deterred by high gas prices. The company has grown sales about 14% a year for the last 10 years, but was hurt during the last recession and Acorn is an attempt to fix the earnings problems caused by a weak economy. I think it’s a good long-term move.

Thompson FN estimates:
3Q: $0.32
4Q: $0.24
Fiscal 2007 $1.15
Fiscal 2008 $1.38

Hey Clark: Look at this one!