Wednesday, November 19, 2008

Moore (AC) For Less

Its hard to believe that less than 3 weeks after our post on specialty craft retailer AC Moore, shares of this net/net are down another 73%. A share can now be had for the change in your pocket. Mr. Market, in his not so subtle way, is telling us that he does not think AC Moore will survive. And its not just AC Moore, by the way, there are a multitude of other companies also being given the scrap heap treatment.

The company recently reported a $7.5 milliom third quarter loss--that's what the headlines say--but this included a deferred tax valuation charge of $4.7 million. That being said, the top line was not pretty, and further evidence of the recession we find ourselves mired in. Sales fell 4.9%, while same store sales fell 9.4% versus the same period last year. This is one of the most challenging environments for retailers in the past 30 years, and will likely to continue to be so until some consumer confidence is restored.

But the market is currently valuing AC Moore at a negative enterprise value (-$1.4 million), theoretically hating the stock to the point that you are being paid to take shares. Now, it's never that simple, but with cash on the books at $46.8 million ($2.30 per share), total debt of $21.6 million, and net cash of $17 million, or $.84 per share, this company's impending demise may be greatly exaggerated.

With a current book value of $9.17, AC Moore trades at just .08 times book. That may not being meaningful given the current environment. But the bigger questions are whether AC Moore has the ability to ride out this storm, and are shares currently worth more than $.77? I voted in the affirmative yesterday, and initiated a small position.

AC Moore
Ticker: ACMR
Price: $.77
Market Cap: $15.6 million
Net Current Asset Value: $85 million
Cash: $46.8 million
Cash/share: $2.3
Total Debt: $29.7 million
Book Value/Share: $9.17

The risks here are indeed great, this stock is liable to be incredibly volatile, and there's always the risk that it could fall to zero. Panic driven markets have driven the price down more than 70% in the past few weeks alone. Stay Tuned.

*The author has a position in AC Moore. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only.

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