As far as we can tell, nothing has changed and our core thesis remains intact. As a reminder, we own the company (via the stock) because of the following:
- Jewelry retailing is a good business over time
- Difficult-to-replicate franchise with history of profitability and extremely high returns on invested capital
- Favorable long-term secular trends
- Shareholder-friendly management team (*although we wish all insiders would stop selling, even if in small increments relative to holdings)
- Attractive absolute and relative valuation on current and future earnings potential
- SEC investigation resolved
- FTC probe resolved
- Law suits fall by wayside
We'll see how results come out today. Without question, the environment for consumer discretionary spending remains weak and the holiday season may be lackluster. However, if Bidz can point to a recovery in Y/Y growth in 4Q09 and 2010 (per 2Q09 commentary), we think the Market may finally take notice. Further, Bidz continues to invest in areas (e.g. new "ERP" system, new product offerings, international reach) that should bear fruit over the medium- to long-term.
Disclosure: long BIDZ.
© 2009 Jeffrey Walkenhorst
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