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Tuesday, July 04, 2006

Eddie Bauer Holdings (EBHC) out of bankruptcy

EBHC (sec)
Emerging from Chapter 11 bankruptcy, they filed a Form 10 with exhibits to register securities with the SEC on Dec 15, 2005 but then they withdrew it on Jan 26, 2006 because they expected to restate the financial statements in that form.

Bank of America's NB Holdings held 6.89% of the stock on Feb 8, 2006.
Fidelity held 11.244% of the stock on Feb 10, 2006 but later down to 8.936% on Feb 14, 2006.

Another Form 10 (exhibits) on May 1, 2006. But then they filed this amendment (exhibits) on June 27.

Chief Merch Officer: Kathleen Boyer has 36,750 options at a $23.37 strike.
Director: John C. Brouillard has 17,000 options (same strike) and 4,280 restricted shares.
Director: William T End
Director: Paul E. Kirincic
CEO: Fabian Mansson has 200K restricted shares and 100K options (same strike)
Sr VP and General Counsel: Shelley B Milano
Sr VP of Retail: Ann Perinchief
Director: Kenneth Reiss
..and so forth.

Getting back to the amended Form 10:
"Eddie Bauer Home" concept was discontinued in Feb 2005 and financial info in the statement doesn't include that stuff, which I don't like because perhaps it's possible to hide stuff there.

265 retail stores. 108 outlet stores.
In 1945, we issued our first mail-order catalog. In 1971, we were acquired by General Mills, Inc., and in 1972 we opened our first store outside of Seattle in San Francisco, California. We celebrated our first $100 million in sales in 1983, at which time we operated 27 retail stores. Between July 1988, when we were acquired by Spiegel, Inc. (“Spiegel”) and end of fiscal 2002, our retail stores increased from 58 to 399 and our outlet stores from 3 to 102. In addition from fiscal 1990 to fiscal 2002, our catalog circulation increased from 61.2 million to 101.6 million (excluding Eddie Bauer Home catalogs). In 1996, we started selling products over the Internet.
They filed for bankruptcy in March 2003.

Since then, they've focused on 1) improving inventory management, 2) closing stores and renegotiating leases, 3) reducing corporate workforce, 4) streamlining backend operations. They weren't able to hire senior and middle-management during the bankruptcy.

2000: $1.6 billion
2001: ?
2002: $1.3 billion
Comps were negative in every quarter between 2000 and 2002.

They claim the revenue decline was due to a loss of brand identity. From my own experience, it seems like the true outdoorsy types shop at places like REI and EMS. Even LL Bean seems more authentic than Eddie Bauer.
We intended to elevate and revitalize the Eddie Bauer brand by substantially updating our product line and redesigning our brand communication approach to generate excitement about our brand both from our core customers and potential new customers.
That means absolutely nothing! They might as well have said, "We intend to use magic crystals and Tibetan prayer flags to generate more business."
The new collection incorporated a wider range of color, more novelty pieces and updated products with modified style, fit and more premium fabric, trim and hardware. We created new catalog imagery that focused on brand communication and provided our stores with new ways to merchandise and display the apparel and accessories. We also engaged in a public relations and marketing initiative in New York City during the holidays to promote our down collection.
A lot of that new collection is still on the shelves, marked down. They should spend a lot of time talking to customers who actually buy stuff from their stores and ask them why they shop at Eddie Bauer. The answers would probably surprise them. In my opinion, E.B. represents one of the few non-fashion-oriented choices for clothes in the malls. There are a lot of people who just want basic clothes that are, well, "normal": stuff that is plain but respectable. Polo had a big chunk of that market for a while, but they're always going off the preppy deep end.

Perhaps the new management will discover this over time. I honestly wrote all of this before reading the next section in the Form 10. Really, I didn't cheat.
Our results from the Fall/Holiday 2005 roll-out as a whole were disappointing and indicate that our customers did not respond positively to the changes we made to our product offerings or marketing approach.
Maybe I should send them a copy of The 22 Immutable Laws of Marketing. If you simply read that book [perhaps once a year, it's very short] and then spend a lot of time studying your customers and your competition, there's no excuse for most marketing screw-ups.

So comps declined 4.3% in Q3 and 7.1% in Q4 of 2005.
Comps declined 10% in Q1 and preliminary results show a 5.7% decline in Q2.

They're trying to learn from their mistakes, but here's what they found:
Here's their plan:
Their gross margins are only 32%. Seems a little low. They're still running at a loss. They'd need something like a 50% increase in revenues to break even.

The CEO, Fabian Mansson, got a $927K bonus for the year 2005 and a $2.6 million bonus for 2004. This guy gets rewarded for driving the company into the ground.

There are something like 30 million shares outstanding. The balance sheet has been cleaned up.

I figure if they were to end up being successful, the shares would be worth perhaps $25. They're trading at around $11.00 now, which is definitely not cheap enough for my tastes unless they find a customer base.

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