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Thursday, March 09, 2006

Jo-Ann's On Sale

Jo-Ann Stores (JAS) has come down more than 60% in the last year. Sure, management is having problems and the CEO/Chairman/President just left, but I see this as a good sign. They are conscious of the problems going on with the transition from small stores to “super-stores.” The move to super-stores is an effort to create a holistic craft shopping experience—whatever that means.

From my view, JAS is a decent company in a boring sector that is unlikely to experience any tremendous growth in the future. This is a value play in the most traditional sense: the market has pegged a price of less than the sum of the company’s parts. Let’s be conservative and say that they can never sell half of the inventory on their books. The company should fetch a value of approximately $15 a share.

I’d like to see them write-off some inventory and concentrate on what sells. I’d expect to see a jump in the share price when they announce that they’ve brought some experienced management on board. In the interim, savvy value investors like Jon Brogaard have taken a large equity stake.

3 comments:

wallstreetraider said...

I have heard of this Jon Brogaard. Is he the same savvy investor who recommended that Chris Hackett and Val Rayzman form the Dag Group and adquire that POS dry cleaner?

Will C. Hambly said...

Brogaard, Hackett, and Rayzman (BHR) are a consortium of DAG Group leveraged-buy-outs that are transforming the dry cleaning industry with greater service and brand name recognition. IPO is planned for early April '06. A $500 MM offering most likely.

Anonymous said...

DAG Group Dry Cleaning failed because there is no differentiation in the business model.