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business newsMSG Never Promised Us a Rose Garden
By
Justin Sharon
Mar 04, 2011 5:00 pm
Renovation costs are now estimated to be almost $1 billion and fourth-quarter EPS and revenues fell short of forecasts.
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A stock priced for perfection after having recently hit a fresh 52-week peak on a Carmelo Anthony-inspired run up was thus left with the sinking feeling of cleaning up empty bottles after an especially ruckus garden party. The entertainment segment, its largest cash generator, experienced sluggish sales including at the touring version of Radio City’s celebrated Christmas Rockettes. And costs also edged up, with a $2.4 million team personnel transaction expense obviously not helping. This one-two punch was a key reason for the firm, which also owns hockey’s New York Rangers, skating on thin ice relative to what analysts were anticipating.
To be fair, net profits were still some 40% ahead of last year’s level, and CEO Hank Ratner hailed “the highest level of [adjusted operating cash flow] in Madison Square Garden’s history.” MSG also generated solid affiliate fee growth and advertising revenue rose $4 million on higher scatter sales from the Knicks, who have gained in the TV ratings if not yet the NBA standings. Long term, there is thus much reason for optimism at the building, which bills itself as "the world’s most famous arena." (Macy’s (M), also on 34th Street, calls itself "the world’s largest store;" it’s clearly not a neighborhood not known for its modesty.)
But the stadium, which hosted 1971′s "Fight of the Century," has a battle on its hands to get back into the good graces of at least one Wall Street researcher. Brokerage firm Miller Tabak cut it to Hold from Buy this morning, and this only 48 hours after Bank of America-Merrill Lynch advised investors to Buy based on “Melo, ‘Mare and Momentum.” Carmelo Anthony and Amar’e Stoudemire, having similarly in the space of but two days both beat the Heat and crashed to Cleveland, know all about how quickly fortunes can change.
Fundamentals still look solid but no stock can defy gravity forever. As any basketball player can tell you, what goes up must come down.
Please see The Carmelo Anthony Economy, LeBron James and Deterioration of the Athlete Brand, and Ticketmaster vs. Scalpers: Who’s Worse?
Merrill Lynch, headquartered in downtown New York, is far enough away from midtown’s Madison Square Garden to be spared the wrath of any angry sports fans -- or shareholders. Alas the distance between Merrill and Goldman Sachs (GS) is much shorter, being but a block away. (That’s Merrill on the left, with Goldman’s gleaming new tower in the middle.) You could say they are only a stone’s throw apart, and one only hopes the distance won’t be tested this way after the former downgraded the latter today. Merrill moved both Goldman and Citigroup (C) to Neutral from Buy amid “expected weakness in first-quarter 2011 results.” Though it still believes the period is “unlikely to be dismal,” Merrill contends “we don’t expect seasonal improvement as strong as often seen in the past.”
This is significant, for the first quarter has historically been the strongest of the entire year at such firms. Allied to ongoing uncertainty over the ultimate implications of both Dodd–Frank regulatory reform and the Volcker Rule, tougher times lie ahead. Guy Moszkowski, the analyst who reset his ratings, is a perennially top-ranked researcher who can move markets. Goldman is arguably fortunate that today’s news may end up being buried between Libya and the unemployment report. The "giant vampire squid" settled down 2.12% but the last instance of Moszkowski making such a move -- also on a Friday interestingly enough; there truly is no better time to bury bad news -- the impact on its New York neighbor was far worse.
Also check out Goldman Looks to Buy Fannie Tax Credits, Rags to Riches CEOs: Lloyd Blankfein, and Citigroup’s Princely Problem.
It’s unlikely footwear firm Genesco Inc. (GCO), which has proudly called Tennessee’s state capital home since 1924, would ever have a problem putting the boot into Goldman either. (See Goldman Sachs Boosts Nashville’s Debt 40% for Convention Center.) But celebration is always ultimately much more satisfying than schadenfreude, and on an otherwise poor session for stocks it can take great credit in a 1.79% increase.
The apparel outfit, whose better-known brands include Johnston & Murphy, reported fourth-quarter net income rose 19%. Shares are now up 50.63% in 52 weeks and, in addition to a strong finish to 2010, CEO Robert Dennis said 2011 is off to a “good start.” In the fourth quarter it earned $1.33 per share excluding extraordinary items, beating Street consensus estimates by $0.04. Revenue rose 14% to $1.79 billion as teenagers hit the mall again in an improving economy. Dennis did say same-store sales growth is expected to “moderate,” and adolescents are of course notoriously fickle when it comes to fashion. But on a day other stocks slid thanks to Libya’s ominously high place on the The Economist‘s shoe throwers index, it’s nice to report at least one company kicked into high gear.
Read related content at Crazy Business Ideas That Actually Worked: Crocs, Biology Professor Embarks on Crusade Against Shoes, and In America People Are Getting Married in Department Store Shoe Aisles.
When even areas of the world that are currently in crisis can countenance the idea of a $3.8 million purse, it’s no surprise to see luxury retailer Hermès International, S.A. (HESAY.PK) head up another 1.71%. The upscale French firm, best know for its handbags and silk scarves, reported an impressive set of results this morning. For the full fiscal year, operating income of 668.2 million euros bested analyst estimates of only 656.6 million.
The results were “stunning,” in the words of researcher Marc Willaume at Raymond James. Considering the analyst rates shares a Sell, that’s high praise indeed. Profits rose 44% and the near-term future looks bright with Hermès having recently raised its outlook for operating-margin growth. It has clearly benefited from a boom in conspicuous consumption among the emerging affluent of Asia, and a second outpost in Mumbai will be among the seven stores it aims to add in this region in 2011. This week has not been France’s finest hour, between the debacle at Christian Dior -- a luxury Parisian neighbor of Hermès -- and a scandal at Renault that could run and run. Hermès has, however, restored a small sliver of Gallic pride this afternoon.
Hermes Beats Wal-Mart at Own Game, Celebrity Retail Fixes, and What Is the Market Size of China’s Luxury Market? have more.
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No positions in stocks mentioned.
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