I have been following the Gordmans company implosion for a while now.
As of a few days ago, Stage stores closed a deal to acquire some 50 former Gordmans stores.
The following is what i am confused on.
“Stage Stores Sees Deal Adding $230M-$245M in Rev For Rest of FY17 * Sees Deal Neutral to Earnings for Rest of FY17 *”
The statement in bold is what i am having trouble with. Does this mean the extra ~$200M is just not going to be counted during FY17? Or does it mean the deal is costing ~$200M and will bring in ~$200M creating no effect in 2017?
Revenue (“Rev”) is sales, not profits. This is saying that, while it’ll increase revenue by “$230M-$245M”, they don’t expect it to lead to a change in earnings (one way or the other) this year.
Lacking additional information, I’d suspect that they’re anticipating that the amount that they’ll have to spend (either on purchasing the stores directly, or, for example, additional expenses to integrate those stores into their system) will effectively offset the additional revenue this year.
Their actual press release is rather poorly written, but **kenobi_65 **nailed it.
They expect the former Gordmans’ stores to add a bunch of revenue that will be roughly offset by extra costs this year. So not much change in total profits.
Next year Stages expects to enjoy the extra revenue without the extra costs and thereby have increased profits.
The combined stores don’t need two sets of accounting teams & two sets of purchasing teams & two sets of HR teams; maybe, say a combined 1¼ of what they have two full teams of today. One-time acquisition costs like severance payments come out of this years earnings but next year’s earnings will increase when they’re only paying for 62% of the combined HQ staff that they currently have between the two stores.