Seeking Alpha: Gordmans Stores Remains In An Unsustainable Structure

Credit where it's due - Josh Arnold was not only negative on Gordmans Stores (NASDAQ:GMAN) back in 2015, he was short the shares and that was absolutely the right call. While I had thought new management would move quickly to address a seriously out-of-whack cost structure, results over the past year suggest that the cost structure is liable to remain stubbornly too high relative to peers and the company's gross margin, and nothing in the same-store sales trend suggests that "growing out of the problem" with more operating scale is a valid or viable plan.

Gordmans should be able to survive for a while, but I don't see a probable path to prosperity given what appears to be a sticky high cost structure. Given that this company would have to cut its SG&A spending almost in half to be in line with its peer group and that operating margins are unlikely to climb above the mid-single-digits on a sustained basis, I've come to realize much too late that this company is likely to continue struggling. If there's a bright side, it's that expectations have been beaten down and there's a sizable short interest - if the company were to report a surprisingly strong quarter, the shares could pop on covering - but that's not the underpinning of a long-term story.

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Gordmans Stores Remains In An Unsustainable Structure

Seeking Alpha: Is Gordmans Stores Pulling Out Of Its Tailspin?

It's funny how much easier it can be to walk when you stop shooting yourself in the foot. That may not be a completely fair opening line for discussing Gordmans Stores (NASDAQ:GMAN), as not all of the company's problems have been self-inflicted, but there have been more than enough missteps in merchandising, marketing, and supply chain management to suggest that the bullet-ridden shoe still fits.

Credit where due - new (or relatively new) CEO Andy Hall seems to be moving quickly to fix many of the serious issues at Gordmans. The market has certainly noticed, with the shares more than doubling since my last article in the fall of 2014. I don't see as much potential in the shares as before, but if Gordmans' new approach to merchandising can boost traffic more than I expect, if supply chain improvements lead to better margin leverage, and/or if the company can credibly re-accelerate its store opening schedule there could still be upside.

That said, investors would do well to remember that retail is savagely competitive and very few companies can establish a compelling brand identity or assortment that makes them a "must have" in the retail sector over the long term.

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Is Gordmans Stores Pulling Out Of Its Tailspin?

Seeking Alpha: Stage Stores Taking A More Realistic Approach

Amidst a challenging retail environment, Stage Stores (NYSE:SSI) has been an interesting story to follow as the company has been challenged by internal execution issues and a changing retail industry. Stage still has some real issues with sales productivity and margins, but management seems willing and able to address these issues more directly instead of trying to grow its way past them.

I've run hot-and-cold on the shares (or rather bullish and "hold/wait") over the past couple of years as the shares have oscillated between the mid-to-high teens and mid-to-high $20's. I was bullish on the stock as of my last article and while the stock is up more than 20% since then, the shares spent the following six months trending down about 15% before a rally late in 2014. I'd also note that investors would have done much better with Kohl's (NYSE:KSS) and a little better with Dillard's (NYSE:DDS).

This is a challenging stock for me right now. On one hand, I do still see the potential for the company to meaningfully grow its footprint and improve its internal sales productivity by adding more cosmetics and home goods and refurbishing its store base. On the other hand, the company has become more dependent on credit-related income and there is a real risk that the retailing landscape has fundamentally shifted. I don't think these shares are necessarily expensive today, but further upside really is tied to real progress with comp growth and margins more than the Street regaining its enthusiasm for the name.

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Stage Stores Taking A More Realistic Approach

Seekng Alpha: Gordmans Stores Has Better Management, Will Results Reflect It?

Six months ago I described Gordmans Stores (NASDAQ:GMAN) as a "falling knife", but since then the shares have acted more like a sharknado. The stock's 45% drop since then can't be explained away by a difficult environment - stocks like Stein Mart (NASDAQ:SMRT), TJX (NYSE:TJX), and Ross Stores (NASDAQ:ROST) haven't been ripping higher, but they haven't been nearly as weak as Gordmans. Despite better inventory management, Gordmans can't seem to get its merchandising/assortments right and the comps and margins are suffering as a result.

Maybe, just maybe, things might be looking up. Gordmans recently named Andy Hall as the new CEO, replacing interim CEO T. Scott King who took over when Jeff Gordman announced his retirement earlier in the year. Hall brings good experience as the former CEO of Stage Stores (NYSE:SSI) and has already laid out some common sense near-term initiatives. Gordmans is still looking at a long road back to growth, and I wouldn't dismiss the competitive threat of the likes of TJX's T.J. Maxx and Marshalls, Kohl's (NYSE:KSS), or Wal-Mart (NYSE:WMT), but the absolute pounding that this stock has seen (down 75% over the past year) has already washed out a lot of expectations.

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Gordmans Stores Has Better Management, Will Results Reflect It?

Seeking Alpha: Stage Stores On Sale Again

Stage Stores (SSI) is giving its shareholders a roller coaster ride through retail. I liked the shares in late January, after which they climbed about 20%, and then pulled back a bit on the enthusiasm in early March. The shares have fallen 27% since then and while the company did get the year off to a disappointing start, I think there's a lot of value in this small retailer.

Stage Stores not only has self-improvement potential from new and improved markdown and assortment initiatives, but also from accelerating e-commerce, store refurbishments, and private credit cards. Add to that the fact that Stage Stores is one of the relatively few department store-style retail stories with meaningful square footage growth potential, and there's a good growth element as well. I do think the next quarter or two could still be pretty turbulent, but I believe these shares should trade closer to $25, suggesting nearly 40% undervaluation.


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Stage Stores On Sale Again

Seeking Alpha: Stage Stores Shifts Some Scenery

When I wrote in late January that I thought Stage Stores (SSI) was an undervalued retailer about which the Street was too bearish, I didn't expect such a quick change in sentiment. The core retailing environment has not gotten all that much better in the intervening time, but the Street was very glad to hear that the company is moving on from the Steele's off-price format. Stage Stores management hasn't revealed the terms of the deal, but I believe the combination of weaker near-term results and less capital needed to support the growth of Steele's do improve the fair value a bit since late January.

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Stage Stores Shifts Some Scenery

Seeking Alpha: Stage Stores Needs To Regain Its Footing

Although investors seem to be largely inured to the idea of tough times in the retailing world, the actual numbers aren't as bad as you might expect. Stocks like J.C. Penney (JCP) and Sears (SHLD) have gotten thumped, but others like Kohl's (KSS) and Dillard's (DDS) are at least in the black for the past year, while Macy's (M) has actually been a market-beater. Stage Stores (SSI) has been part of the bad crowd, with the shares down 13% and within 10% of their 52-week low, as investors have grown disillusioned with comp growth misses and halting progress towards better margins.

I do worry that turning bullish on Stage Stores today is like reaching out to catch a falling knife, but I like the basic business model and I believe the company has a strategy in place that can drive better operating results. Stage Stores still serves an under-penetrated addressable market of smaller towns and better merchandising should ultimately lead to better margins. If the company can improve its bottom line profitability, a turnaround could take these shares into the mid-$20s while the current price already seems to discount the idea that management can't really do any better.

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Stage Stores Needs To Regain Its Footing