Throw the dice or towel on RedEnvelope
Today is another terrible day for stocks but it's really bad for RedEnvelope, Inc. (Public, NASDAQ:REDE). How about a 50% drop in share price and telling the public that if you don't get funding, you are shutting down in the quarter ending June 2008.
Shares of REDE are now around $1.75 and the Masters think we could get down to $1. They reported yesterday and they plunged to a third-quarter loss of $4.3 million, or 45 cents a share, from a profit of $5.3 million, or 56 cents a share, a year earlier.
Revenue fell to $45.2 million from $57 million a year earlier.
The kicker is this little bit of information on the call yesterday:
'The company believes the cash on hand and available under its lending arrangements will be sufficient to fund operations and anticipated capital expenditures through the quarter ending June 2008,' RedEnvelope said. 'However, the continuation of the company as a going concern beyond the quarter ending June 2008 is dependent upon the company's ability to fund operations and anticipated capital expenditures and achieve profitable operations in the future.'
A swing and a miss.
The past few months for REDE have been horrible on the stock and investors are bailing today. Average volume for REDE shares is around 11,000 a day, today at 10:23 PST AM we are at 174,500 and moving up every second.
Looking for a bounce on REDE?
Wait for the Analysts to murder this stock, let it fall to $1, then think about it.
Happy Valentines RedEnvelope Management.
Click Here to read their Press Release from yesterday.
A few of the highlights:
Third Quarter Fiscal 2008 Business Highlights
-- Net revenues per order decreased to approximately $91, compared to
approximately $93 in Q3 fiscal 2007
-- Gross profit per order decreased to approximately $44 compared to $50
in Q3 fiscal 2007
-- Approximately 495,000 orders shipped, a decrease of approximately 20%
from the same period of the prior year, primarily due to a decline in
customer response rates and a reduction in marketing expenditures for
new customer prospecting in the second half of fiscal 2007
-- New customers grew by approximately 134,000 from the end of Q2 fiscal
2008, compared with an increase of 227,000 during the third quarter of
fiscal 2007, resulting in a total customer file of approximately 3.6
Gross profit margin was approximately 48.7% in the third quarter of
fiscal 2008, compared to 54.1% in the same period last fiscal year,
primarily due to the ongoing shift in merchandising strategy and product
Marketing expenses in the third quarter of fiscal 2008 were $13.5
million, or 29.8% of net revenues, compared to $12.6 million, or 22.1% of
net revenues, in the same period last year. The increase in dollars is
primarily due to higher catalog production and postage costs, and increased
public relations activities.
Third quarter fulfillment expenses were flat year-over-year at $7.4
million, but increased 320 basis points to 16.3% of net revenues due to the
decrease in net revenues.
General and administrative expenses were $5.5 million in the third
quarter of fiscal 2008, consistent with the comparable period last year on
a dollar basis.
As of December 30, 2007, RedEnvelope had $12.3 million in cash and cash
equivalents and no debt. The Company has a credit facility of up to $12.5
million (of which $3.8 million was available as of December 30, 2007), the
availability of which is subject to an inventory-based formula, and a
stand-by subordinated, unsecured credit arrangement for up to $2.6 million.
The Company believes the cash on hand and available under its lending
arrangements will be sufficient to fund operations and anticipated capital
expenditures through the quarter ending June 2008. However, the
continuation of the Company as a going concern beyond the quarter ending
June 2008 is dependent upon the Company's ability to fund operations and
anticipated capital expenditures and achieve profitable operations in the
future. The Company is focused on its financial condition and capital needs
and is evaluating various options for addressing these challenges
immediately. However, there can be no assurance that additional financing
or other alternatives will be available when necessary, or if available,
that such alternatives will not result in undue dilution to, or an adverse
impact on the rights of, the Company's existing stockholders.
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