Negative Sentiment Drives Share Price Down Despite Favorable Economic Climate And Thickening Growth Prospects
Emerging growth retailer Gordmans Stores (NASDAQ: GMAN) has, in recent days, been on the receiving end of negative commentary. As of this writing, its share price of $11.74 is intimately close to its 52-week low of $11.55. This bearish situation precipitated in mid-January after the company lowered its 4Q estimate, highlighting a 4.6 percent dip in same-store sales. At the wake of this slashed outlook, its shares slumped more than 15 percent.
Some of the takeaways from its foreshortened 4Q outlook include a reduced 4Q revenue forecast. The company expects 4Q revenue to come in at $203 million, reducing the forecast from previous estimates of $213-$215 million. Analysts on Thompson Reuters on the other hand pegged a revenue estimate of $214 million. Gordmans also reduced its EPS estimate, reducing it from 37 cents to 35 cents. The Street however has an estimate of 60 cents.
Going by this snapshot alone, the bearish outlook on Gordmans is justified. Nevertheless, under the shroud of bearishness, lies a very good opportunity. The current cheap price and low demand for the stock presents a good entry point to a company that is not only poised for future growth but that is also certain to gain value in coming years.
Emphasis on projects that enhance longevity
Gordmans current inclination toward projects that enhance longevity suggests that growth will be on an upward trajectory in the coming years. The company’s continued growth initiatives are candidly displayed by its current plans to construct and equip a 545000 square foot distribution centre in Hendricks County, Indiana. The Omaha, Neb-based company intends to invest capital of $37.5 million in the project. This facility will be Gordmans second distribution center in the Midwest.
In addition to this project brightening growth prospects, it also creates a lot of alternate opportunities for Goldman. The retail company will receive a lot of positive social recognition because of the probable 250 jobs that the Hendricks, Indiana project will yield. In light of these job creation plans, the Indiana Economic Development Corporation presented up to $1.1 million in conditional tax credits to the retail company.
Just as a demonstration of how much the company has grown in the past years, CEO Jeff Gordman shared insights on store base growth over the past three years. While talking about the Indiana project, Jeff Gordman noted that if he includes the ten stores that the company plans to open this year, the company’s store base will have expanded by almost 40 percent since 2010.
More importantly, current economic conditions and positive retail sales reports suggest that retailers will rake in handsomely in coming years. Jobless claims have been reducing steadily and as reported recently, they once again reduced in the month of December. This decline has been accompanied by a similar increase in retail sales.
The chart below gives a clearer insight on the degree to which jobless claims have reduced over the years.
As shown, claims for unemployment benefits have reduced consistently post-2008. Decrease in jobless claims is typically accompanied by improved economic conditions and better retail sales. As such, The current economic climate presents a good playing ground for Gordmans.