Here are my thoughts:
- My original decision was based on significant undervaluation and nice dividend yield, which the company has been consistently increasing.
- Shortly after I started the position, they had a disappointing earnings announcement, and lowered guidance for the full year.
- Tuesday, they announced they would be reducing brick and mortar square footage in the USA by 15%. They have a small international presence in Europe and Australia, and both regions are unprofitable.
- Charges for the restructing over the next several years are expected to to exceed $150 million this year, and are not defined in future years. I assume restructuring charges will continue until they hit their goal of 15% reduction in 2015.
- Earnings will be negatively impacted this year, 2013, and 2014. Plus, the U.S. economy is struggling this year, so I expect earnings to be adjusted downwards significantly.
- The Fast Graph above shows the original premise - analysts projecting growth in eps of at least 6.8%. Do you believe they will achieve earnings growth in 2012 and 2013? I don't, so I expect the price and fair value to converge (lower price, lower expectations).
- May be making a mistake here, but I'd like to have more cash in the portfolio to deploy on existing stocks at good valuations, or on new positions.