Tags: Maidenform | price | risk | MFB

Maidenform Brands Carries Price Risk

By    |   Wednesday, 02 Nov 2011 11:15 AM

Maidenform Brands (MFB) has maintained an attractive level of sales and earnings growth by using a multi-channel approach to marketing the company's products. The share valuation indicates a stock which may be undervalued in relation to growth rates. But investors should be aware of the risk of an excessively negative share price move if the company posts a bad earnings report.

Maidenform Brands designs, markets and distributes women's underwear products. The company owns several brands, including the namesake Maidenform brand, Donna Karan Intimates and DKNY. The product mix is divided into three segments: bras, panties and shapewear.

Marketing channels include regional and national department store chains, mass market chains such as Walmart and Target, and the company's own retail stores. International sales are one of the Maidenform's growth engines. Intimate apparel sales is a $5 billion industry in the United States alone.

For the first half of 2011, total sales increased 14 percent to $334 million, up from $292 million in 2010. Wholesale sales account for 90 percent of revenues and Maidenform's retail stores bring in the other 10 percent.

International sales were about 10 percent of the total revenues. All distribution channels have produced growing sales. Top growth factors in the second quarter were shapewear sales up 33 percent, mass market channel sales up 29 percent and international sales increased up 39 percent.

Shapewear is the growth segment for Maidenform. The segment makes up only 8 percent of total women's underwear sales but accounts for 37 percent of Maidenform revenues. The company is a major player in this segment.

Market expectations

Maidenform has a history of putting out forward earnings guidance from the next few quarters. Wall Street analysts tend to mimic the guidance for their own estimates and then the actual earnings reports beat the consensus estimate by a handy margin. Through the 2011 second quarter, Maidenform somehow managed to beat the consensus 15 straight quarters.

The possible downside to this cozy earnings estimates relationship would be if the company at some point reported earnings that did not grow by the expected amount and did not beat the estimate. Institutional firms hold 98 percent of MFB shares. If the institutions decide to dump shares on bad news, the price could take a significant hit.

The company next reports on Nov. 9.

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Maidenform Brands (MFB) has maintained an attractive level of sales and earnings growth by using a multi-channel approach to marketing the company's products. The share valuation indicates a stock which may be undervalued in relation to growth rates. But investors should be...
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2011-15-02
Wednesday, 02 Nov 2011 11:15 AM
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