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Category: Stock Market and Bluestem
Date: 30 September 2019 Stock Price: $0.45 We take a look at the 2nd quarter earnings release of their 2019 fiscal year of Bluestem Group an over the counter stock that owns various direct to consumer retail brands.
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About Bluestem
Bluestem Group Inc., a holding company headquartered in Eden Prairie, MN, operates multiple direct to consumer retail brands through its subsidiary Bluestem Brands. The Northstar Portfolio includes Fingerhut and Gettington, both of which are national multi-channel retail brands offering a broad selection of name brand and private label merchandise serving low- to middle-income consumers by offering multiple payment plans through revolving credit lines or installment loans offered by WebBank. The Orchard Portfolio consists of multichannel brands that offer apparel, accessories, and home products for the boomer and senior demographic, generally considered age 50 and over and provide customers with the ability to obtain credit through a third-party private label credit card. At the end of fiscal 2018, the Company announced that it would be exiting from six legacy brands in fiscal 2019: Bedford Fair, Gold Violin, Norm Thompson, Sahalie, Tog Shop and WinterSilks. Continuing brands include Appleseed’s, Blair, Draper’s & Damon’s, Haband, and Old Pueblo Traders.
Overview of Bluestem's latest earnings report
The numbers we are interested in (for the quarter):
- Revenue: $365.882 million (down from $422.557 million from the same quarter of the previous year)
- Revenue decreased by 13.4% over the last 12 months
- Total costs and expenses: $351.872 million (down from $405.517 million for the same quarter of the previous year)
- Total costs and expenses decreased by -13.2% over the last 12 months
- Net income $2.378 million (down from $6.111 million for the same quarter of the previous year)
- Diluted earnings per share: $0.02 (down from $0.05 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 134.473 million (up from 132.764 million for the same quarter of the previous year)
- Cash and cash equivalents: $118.751 million
- Cash and cash equivalents per share: $0.88
- Cash and cash equivalents makes up 196% of Bluestem's market capital
- Cash and cash equivalents makes up 19.1% of Bluestem's total assets
- Inventories: $177.126 million
- Inventories makes up 28.4% of Bluestem's total assets
- Cash generated from operations (for the 6 months): $32.135 million
- Cash generated from operations per share (for the 6 months): $0.238
Bluestem's management commentary on the results and earnings guidance
Eden Prairie, MN – September 16, 2019 – Bluestem Group Inc. ("Bluestem Group" or the "Company")(OTCMKTS: BGRP) today reported unaudited consolidated financial results that include its wholly-owned subsidiary, Bluestem Brands, Inc. and its subsidiaries (“Bluestem Brands”), for the 13- and 26-weeks ended August 2, 2019 and August 3, 2018. We refer to the 13-week periods in this release as the "second quarter." Bluestem is a multi-brand, direct-to-consumer online retailer of a broad selection of name-brand and private label general merchandise serving the boomer and senior demographic, generally considered age 50 and over, and low- to middle-income consumers across all age demographics.
Bruce Cazenave, CEO, stated, “During second quarter, we continued to benefit from initiatives employed to stabilize the credit portfolio and delivered increased contribution margin rates once again at both the Northstar and Orchard portfolios. At Northstar, we remain focused on implementing our customer segmentation and personalization strategies to drive increased overall customer engagement while also continuing to deliver improvements in the credit portfolio. At Orchard, there are encouraging signs that our continued focus on circulation productivity as well as refinements to our merchandising and marketing strategies will yield positive results for our go-forward brands. At this time, we continue to develop a new three year strategic plan which will add focus to driving improved performance in core business processes as well as capitalizing on our growth opportunities. We have a differentiated business model that enables us to offer a compelling value proposition to our value-minded customers and believe that the execution of this plan will lead to long term profitable growth and enhanced value to our stakeholders.”
Bruce Cazenave, CEO, stated, “During second quarter, we continued to benefit from initiatives employed to stabilize the credit portfolio and delivered increased contribution margin rates once again at both the Northstar and Orchard portfolios. At Northstar, we remain focused on implementing our customer segmentation and personalization strategies to drive increased overall customer engagement while also continuing to deliver improvements in the credit portfolio. At Orchard, there are encouraging signs that our continued focus on circulation productivity as well as refinements to our merchandising and marketing strategies will yield positive results for our go-forward brands. At this time, we continue to develop a new three year strategic plan which will add focus to driving improved performance in core business processes as well as capitalizing on our growth opportunities. We have a differentiated business model that enables us to offer a compelling value proposition to our value-minded customers and believe that the execution of this plan will lead to long term profitable growth and enhanced value to our stakeholders.”
Bluestem (OTCMKTS: BGRP) stock price history
The image below, obtained from Google, shows the stock price history of Bluestem (OTCMKTS: BGRP) over the last 5 years. And its been a horrible time for the stockholders of Bluestem group. 5 years ago the stock was trading around $5 a stock while it is currently trading at $0.45. Thats a negative return of 91% over the last 5 years. It is also trading at a lot closer to its 52 week low than it is to its 52 week high which to us is clear indication that the short term sentiment and momentum of Bluestem is overwhelmingly negative.
Bluestem (OTCMKTS: BGRP) latest stock valuation
So based on the earnings report of Bluestem (OTCMKTS: BGRP) what do we value Bluestem (BGRP) stock at? Based on their current earnings report and the fact that they have a substantial amount of cash on their balance sheet and decent cash generating capacity we value the stock of Bluestem at $1.28 a stock. We therefore believe the stock of Bluestem is undervalued. But we would caution investors looking to buy into the group to think long and hard before buying the stock as it might be hard to get rid of the shares should you want to sell since it is trading on the over the counter market which is not nearly as liquid as regular stock exchanges such as the NASDAQ or NYSE.
In addition to this the group has significant long term debt it needs to get rid of, as the liabilities is currently far more than their assets, so should the group run into cash flow problems the group could collapse pretty easily as their assets are not enough to cover their liabilities at this point.
In addition to this the group has significant long term debt it needs to get rid of, as the liabilities is currently far more than their assets, so should the group run into cash flow problems the group could collapse pretty easily as their assets are not enough to cover their liabilities at this point.