Knobias ClipReport (8-14-2007)

Submitted from Knobias ClipReport

Monday’s session once again saw indecision with volatility being the name of the game. Worries were somewhat eased with the infusion of capital from central banks and Goldman Sachs’ announcement of the addition of new investors into one of the firm’s troubled funds.

On the horizon and in the back of many traders’ minds were the storms brewing in the oceans. Hurricane Flossie was expected to clip Hawaii but wasn’t expected to cause much disarray in the name of global economic impact. What was on most radar was what will be named Dean if its sustained wind strengthens to at least 39 mph, the threshold for a named storm. The tropical depression was still 2,000 miles east of the Lesser Antilles but still was causing large spikes in oil futures.

In the small cap space, two names were gathering attention and received ‘boosts’ on what otherwise was more of a ‘testing the water’ type day.

Rick’s Cabaret International Inc. (RICK) saw shares gained some 5.24% on elevated volume. The Company announced during Monday’s session an inclusion into the NASDAQ Global Market. The Company operates upscale adult nightclubs serving primarily business executives and professionals that offer live adult entertainment, restaurant and bar operations in New York City, New Orleans, Charlotte, Houston, Minneapolis and possibly Philadelphia.

On August 9th, the Company announced the signing of a LOI to acquire a controlling interesting in an adult nightclub in Philadelphia currently operating as Crazy Horse Too. The expected addition of the club is in line with the Company’s past strategy of rolling up other clubs located near sports venues, casinos, and airports. Noted in the release, the Company already has plans for the club in Philadelphia of the installation of a sports bar and converting part of the venue to a high-end steak house, which when implemented, was expected to become one of their top performers in terms of revenue and profit.

The Company also recently reported nightclub sales for July which saw a 54% gain to $2.95 million and same store sales gains of 19%. With earnings expected on August 14th after the market closes, the name is certainly one to follow over the coming days.

Another name that also saw increased attention was Maidenform Brands, Inc. (MFB). Shares gained some 2.35% on elevated volume. The Company is a global intimate apparel company with a portfolio of established and well-known brands.

On August 7th, the Company reported its second quarter earnings. Sales were reported at $118 million versus $117 million in the comparable period last year. Adjusted diluted earnings per common share increased 15.4% to 45c. During the quarter, the Company prepaid $10 million of debt to recapitalize at a cheaper rate and also increased their share buyback programs by $12.6 million bringing the total amount to $25 million of common stock.

Thomas J. Ward, Chief Executive Officer, stated in the earnings release, “I am pleased with our second quarter performance and our team's ability to drive strong earnings per share growth. We implemented three key actions in the quarter that further strengthened our position for long-term success. First, our focus on Maidenform's branded business led to low double-digit net sales growth in our branded wholesale business. Second, we improved consolidated gross margins by 220 basis points to 39.9% through our customer and product mix in the quarter, as well as sourcing initiatives. And last, we strengthened the balance sheet by refinancing our credit facility with significantly lower rates, while maintaining financial flexibility to execute future growth.”

In the conference call, the Company also noted that they see the intimate apparel business softening but noted that this segment of the market had been outperforming other segments. With any type of overall pullback, the segment should still outperform the other areas.

With the Company’s cleaning up of the balance sheet, improved margins, expectations of EPS growth in the 15%-18% range, international sales growth initiatives, as well as the ability and intent to make an acquisition in the luxury intimate apparel area, and one can easily see the name is one to follow over the coming months. Investors would be wise to watch.


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