Friday, October 7, 2011

Syms, A Terrible Quarter, And Why I'm Still Long.

After reading the Syms' newest 10Q, I am almost (but not quite) shocked by how bad the results were. However, I am still long the stock.

In light of the mounting losses, it seems that the company will be forced to do something, which could involve the sale of a lot of assets... They did sell, since the end of last quarter, a small piece of their real estate pie (in Tampa) via a sale leaseback for $3.8 million, despite being on government tax records for well under $3 million. The lease only lasts until the end of the year and has a 1 year renewal option. This may indicate that they are trying to liquidate the inventory of the store this Christmas season, though, there is no way of knowing what is going on inside of the company.

Syms also sold off a store in North Randall Ohio, which, I believe to be a Filene's location. I am curious as to the specifics of this, as, I am not under the impression that they actually owned the real estate, which, would indicate that they literally just sold the store off to TJ Maxx or something alone those lines.

Looking at the screen shot below, the company doesn't appear to have any assets held for sale, which, is interesting to say the least. Additionally, it appears that the company has significantly less inventory now than they did a year ago, though, in the previous year, they did have a surge of it.

Overall, I am disappointed with results, but, am not unhappy with my decision to still be long the stock. The company may be getting it's back against the wall, and forced to do something drastic. That said, a turnaround is still possible. This filing, which showed a high amount of losses, is the epitome of why I will only invest in a turnaround play if there is already a huge margin of safety in the assets of a business... Specific to this situation, in the event that the turnaround doesn't happen, I am still relatively protected by a mound of real estate. On the positive, a lot of the losses were due to non-cash charges such as depreciation, so, the situation isn't necessarily so dire in the short term.

Disclosure: Long Syms. This is not advice or a recommendation of any kind. Always do a ton of your own research in regard to anything that I say, do, write, or so much as even think about.

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