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About 15 years ago, Mrs. Market asked me to take my 3 year old son, Trevor, to his exercise class one evening. So I’m thinking, “What in the world could a 3 year do in his exercise class besides dump in his pants??” The name of the place I took him to was Gymboree.
So I go in there and there are all these crazy women singing songs like “It’s one two three….Gymboree…time to exercise…time to exercise!” In the meantime all these little kids are running around, jumping and flapping their arms and yes, probably, dumping in their pants.
Then they sing the Gymbo song..”Dance Gymbo Dance!” and the kids are going mental. They they say “Sleep Gymbo Sleep” and they put this voodoo doll down on the floor and all these kids immediately go to sleep like they were hypnotized.
So $$$MR. MARKET$$$ is getting very nervous. Meanwhile my 3 year old runs over to the monkey bars and points up at them. He wants me to lift him up so he can grab the monkey bars. Now back then Trevor was a pretty round kid and as heavy as lead. I was thinking that I would put him up there and he’d hang on for about 4 seconds before he dive bombs into the mat for a face plant. But he insists…
Ah what the heck. So I put him on the monkey bars and all of a sudden he starts swinging back and forth like an orangutan. Up and back..up and back….eating up those monkey bars like they were the dashed white line on the New Jersey turnpike. Well whadda u know??? So I bought him a Gymboree bib:
And 15 years later, this is him:
If it wasn’t for Gymboree, I would never have known that my kid liked sports.
Today I bought Gymboree (GYMB) at 46.44. I will sell it in 4 – 6 weeks at 54.06. Here’s why I like Gymboree:
This stock is on a MAJOR roll, up over 200% in the last 6 months. Why? Because GYMB was oversold when everyone thought the world was coming to an end.
The back-to-school season started off strong and GYMB will continue to come up with innovative and creative ways to drive traffic and offer compelling promotions.
Even in a recession, children grow, and they need new clothes as they grow, so that is a category that tends to be cut back on less than adult apparel. GYMB fared extremely well in what remained a difficult consumer environment, posting 2Q09 operating income growth 35% and an EPS increase of 52%. Cash and cash equivalents at the end of the quarter were roughly $165.0 million with no short- or long-term borrowings.
In the near term, their strategy continues to be focused on gaining market share through aggressive marketing and expanding their current branded events. Over the last four years Gymboree has implemented a broad-based marketing strategy that is driving new customers into their stores and onto the online websites. Once the customers are in their data base, they stay connected with customers through regular email efforts and social networking sites.
Back-to-school market share has been a focus at Gymboree with a goal to have Gymboree become top of mind for back-to-school shopping for moms of early-grade school kids.
The total number of stores open at the end of the quarter was 926, including 591 Gymboree stores in the U.S., 31 Gymboree stores in Canada, 2 Gymboree stores in Puerto Rico, 135 Gymboree outlet stores, 120 Janie and Jack shops, and 47 Crazy 8 stores. During the quarter they opened a total of 25 new stores. Total square footage under management at the end of the quarter was 1.818 million square feet, with an average store size of roughly 19,060 square feet. They plan to open 26 new stores during the third quarter consisting of 7 new Gymboree stores, 4 new Gymboree outlets, and 15 Crazy 8 stores. For the full year, we are planning for 72 new stores consisting of 18 Gymboree stores, 21 Gymboree outlets, 5 Janie and Jack shops, and 28 Crazy 8 stores.
Why will earnings increase? The first is the scale. They are going to have more stores than they did in Q2 and on the year the average store volume will be higher and their margins are coming up.
Way up apparently… Net sales from retail operations for the fiscal quarter ended August 1, 2009, totaled $212.3 million, a 5% increase from the $202.8 million in net sales from retail operations for the second fiscal quarter of the prior year. For the third fiscal quarter of 2009, the Company expects a low-single digit decrease in comparable store sales versus the same period of the prior year. The Company expects earnings for the third fiscal quarter in the range of $0.95 to $1.03 per diluted share.
So you have a stock up over 200% in the last 6 months with a PE of only 14.5 playing in the arena of specialty retail which usually carries an industry PE of 25. So based on all of these facts, what do the ANAL-ysts think? They think that GYMB will bank $3.30 per share this year on sales of $1.03 Billion. They should be wearing Gymboree clothes rather than picking Gymboree’s stock price. $$$MR. MARKET$$$ predicts that GYMB will earn $3.80 per share on sales of 1.13 Billion.. That’s right. Even with the ultra conservative PE of 14.5 (meaning NO HELP at all from the expected end of recession and associated bull market and assuming NO PE expansion), the stock price still calculates out to 14.5 x $3.80 = $55.10 which is past my sell target.
What does the CEO, Mr. Matthew K. McCauley (that’s McCauley..not Matthew Mcconaughey…keep your shirt on you pencil necked geek) think about the Gymboree outlook? Well first of all this guy is 36 years old making over $3 million bucks a year. He should be in Vegas with me next week smoking cigars in the sports book rather than making cautious statements about his company. But anyway:
“With our solid cash flow, a strong balance sheet, tremendous brand equity, and new brand growth ahead, we are optimistic about our ultimate vision of reaching every mom in America and driving substantial long-term growth for our shareholders.”
“Just to comment on all the things we have on our plate. Our philosophy has always been to focus on the big opportunities, at the same time we want to be testing things and making sure that we are ready for the next big opportunity, as we feel like our bandwidth opens up. And so that's really what we're doing. We're doing the same thing that we've been doing the last few years, which is focus on the biggest opportunities, keep testing lots of different things to be prepared for the next big one. So that's what we're doing with international, just to comment on that. That's part of education.”
To the kids of America…keep swinging on those monkey bars…it’s good for you.
I am HUGE!
$$$MR. MARKET$$$
www.mrmarketishuge.com
So I go in there and there are all these crazy women singing songs like “It’s one two three….Gymboree…time to exercise…time to exercise!” In the meantime all these little kids are running around, jumping and flapping their arms and yes, probably, dumping in their pants.
Then they sing the Gymbo song..”Dance Gymbo Dance!” and the kids are going mental. They they say “Sleep Gymbo Sleep” and they put this voodoo doll down on the floor and all these kids immediately go to sleep like they were hypnotized.
So $$$MR. MARKET$$$ is getting very nervous. Meanwhile my 3 year old runs over to the monkey bars and points up at them. He wants me to lift him up so he can grab the monkey bars. Now back then Trevor was a pretty round kid and as heavy as lead. I was thinking that I would put him up there and he’d hang on for about 4 seconds before he dive bombs into the mat for a face plant. But he insists…
Ah what the heck. So I put him on the monkey bars and all of a sudden he starts swinging back and forth like an orangutan. Up and back..up and back….eating up those monkey bars like they were the dashed white line on the New Jersey turnpike. Well whadda u know??? So I bought him a Gymboree bib:
And 15 years later, this is him:
If it wasn’t for Gymboree, I would never have known that my kid liked sports.
Today I bought Gymboree (GYMB) at 46.44. I will sell it in 4 – 6 weeks at 54.06. Here’s why I like Gymboree:
This stock is on a MAJOR roll, up over 200% in the last 6 months. Why? Because GYMB was oversold when everyone thought the world was coming to an end.
- “Oh there’s a recession coming. I can’t buy baby clothes.”
- “Oh the recession is here, I can’t buy baby clothes.”
- “Hey the recession is over and my baby has no clothes.”
The back-to-school season started off strong and GYMB will continue to come up with innovative and creative ways to drive traffic and offer compelling promotions.
Even in a recession, children grow, and they need new clothes as they grow, so that is a category that tends to be cut back on less than adult apparel. GYMB fared extremely well in what remained a difficult consumer environment, posting 2Q09 operating income growth 35% and an EPS increase of 52%. Cash and cash equivalents at the end of the quarter were roughly $165.0 million with no short- or long-term borrowings.
In the near term, their strategy continues to be focused on gaining market share through aggressive marketing and expanding their current branded events. Over the last four years Gymboree has implemented a broad-based marketing strategy that is driving new customers into their stores and onto the online websites. Once the customers are in their data base, they stay connected with customers through regular email efforts and social networking sites.
Back-to-school market share has been a focus at Gymboree with a goal to have Gymboree become top of mind for back-to-school shopping for moms of early-grade school kids.
The total number of stores open at the end of the quarter was 926, including 591 Gymboree stores in the U.S., 31 Gymboree stores in Canada, 2 Gymboree stores in Puerto Rico, 135 Gymboree outlet stores, 120 Janie and Jack shops, and 47 Crazy 8 stores. During the quarter they opened a total of 25 new stores. Total square footage under management at the end of the quarter was 1.818 million square feet, with an average store size of roughly 19,060 square feet. They plan to open 26 new stores during the third quarter consisting of 7 new Gymboree stores, 4 new Gymboree outlets, and 15 Crazy 8 stores. For the full year, we are planning for 72 new stores consisting of 18 Gymboree stores, 21 Gymboree outlets, 5 Janie and Jack shops, and 28 Crazy 8 stores.
Why will earnings increase? The first is the scale. They are going to have more stores than they did in Q2 and on the year the average store volume will be higher and their margins are coming up.
Way up apparently… Net sales from retail operations for the fiscal quarter ended August 1, 2009, totaled $212.3 million, a 5% increase from the $202.8 million in net sales from retail operations for the second fiscal quarter of the prior year. For the third fiscal quarter of 2009, the Company expects a low-single digit decrease in comparable store sales versus the same period of the prior year. The Company expects earnings for the third fiscal quarter in the range of $0.95 to $1.03 per diluted share.
So you have a stock up over 200% in the last 6 months with a PE of only 14.5 playing in the arena of specialty retail which usually carries an industry PE of 25. So based on all of these facts, what do the ANAL-ysts think? They think that GYMB will bank $3.30 per share this year on sales of $1.03 Billion. They should be wearing Gymboree clothes rather than picking Gymboree’s stock price. $$$MR. MARKET$$$ predicts that GYMB will earn $3.80 per share on sales of 1.13 Billion.. That’s right. Even with the ultra conservative PE of 14.5 (meaning NO HELP at all from the expected end of recession and associated bull market and assuming NO PE expansion), the stock price still calculates out to 14.5 x $3.80 = $55.10 which is past my sell target.
What does the CEO, Mr. Matthew K. McCauley (that’s McCauley..not Matthew Mcconaughey…keep your shirt on you pencil necked geek) think about the Gymboree outlook? Well first of all this guy is 36 years old making over $3 million bucks a year. He should be in Vegas with me next week smoking cigars in the sports book rather than making cautious statements about his company. But anyway:
“With our solid cash flow, a strong balance sheet, tremendous brand equity, and new brand growth ahead, we are optimistic about our ultimate vision of reaching every mom in America and driving substantial long-term growth for our shareholders.”
“Just to comment on all the things we have on our plate. Our philosophy has always been to focus on the big opportunities, at the same time we want to be testing things and making sure that we are ready for the next big opportunity, as we feel like our bandwidth opens up. And so that's really what we're doing. We're doing the same thing that we've been doing the last few years, which is focus on the biggest opportunities, keep testing lots of different things to be prepared for the next big one. So that's what we're doing with international, just to comment on that. That's part of education.”
To the kids of America…keep swinging on those monkey bars…it’s good for you.
I am HUGE!
$$$MR. MARKET$$$
www.mrmarketishuge.com
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