Reworked Price Points Fuel Bombay's Rebound
"I think they can grow 50 percent annually over the next five years in terms of [earnings per share]," said analyst Laura Champine of Morgan Keegan, Memphis, TN. "This is the best long-term growth stock I follow, [and] I follow a dozen stocks."
The company saw its stock price reach $12.63 on Oct. 28, up 28.22 percent from $9.85 posted Sept. 30. It rose to $13.30 on Oct. 29 and approached $14 in morning trading the next day. But more impressive is the year-over-year comparison: The stock was at $2.93 on Oct. 28, 2002.
The Fort Worth, TX, marketer of home accessories, wall decor and furniture reported Oct. 8 that same-store sales for stores open more than a year increased 17 percent for the five weeks ended Oct. 4. Total revenue rose 22 percent to $53.2 million versus $43.6 million in the five weeks ended Oct. 5, 2002.
In the 35 weeks ended Oct. 4, same-store sales climbed 23 percent while total revenue increased 28 percent to $340.5 million from $265.1 million last year.
"The single-biggest driver [of the stock] over that period has been the same-store sales numbers for September," Champine said. "It was the first month in which they lapped tough comparisons, putting up a 17 percent increase on top of 15 percent in the year previous.
"This September their in-stock position is much improved from a year ago."
Last September the company had "price points that were all over the place," she said, but now employs a "good, better, best" strategy.
"It was a net lowering of price points that has driven sales," she said. "In the past, end tables were priced from $60 to $360 and were all over the store. Now they are in one section, and they are priced at $75, $100 and $125. They also moved all of the tables to one area ... so the consumer doesn't have to search all over the store, and the price points make more sense. You can go a little more expensive, or cheaper, than $100. It's not a variety of 20 different price points."
The catalog's significance was not lost on Champine.
"They reinstated the catalog in January of this year after nine months without one," she said. "They had decided to go to a direct postcard that didn't work. Catalog sales are [about] 3 percent of total company sales. It's meant to drive traffic into the stores. That's [its] real function."
The company announced Oct. 2 an alliance with Amazon.com to sell all Bombay, Bombay KIDS and Bombay Outlet products on Amazon.com, with a Bombay-branded store within Amazon's Home & Garden store. Bombay will carry the same products at the same prices on Amazon that are available in Bombay's stores and at www.bombaycompany.com.
"I have no idea what the impact could be," she said. "Amazon has millions of eyeballs, so it could be huge. It might grow to 5 percent of sales at the end of next year."
Champine also discussed the move of its store base "off mall ... [allowing] them to join the rest of the category, which includes Restoration Hardware, Bed Bath & Beyond and Pier 1.
"They should be able to lower their rent expense dramatically," she said.
In other news, Delia's was replaced by Alloy, which completed its acquisition of Delia's last month.