Kayak/Snow - AWAY doesn't have to BEAT all those guys, this is simply a partnership that gives them exposure to boost sales. AWAY also had a bad Q but now it's obvious that the bad Q was due to spending to rush we development for the partnership rollout. Other numbers were good so they make an attractive, inexpensive bet.
ARO/Palotay - Well, they didn't make the cut when we cashed in the LTP because they were up at $3.50 at the time, having fallen back from $4+, which was already a disappointment.
The big March drop in ARO was caused by 0.60 loss expectations and they did lose 0.55 when they officially announced. The company is in a big turnaround cycle and changing all the merchandise threw comp store sales off 9.5% as they dropped 232 of 1,100 stores. They are banking heavily on the "back to school" market this year but investors are not at all confident and we're back to $1.77 with the company on track to lose about $1.35 this year, which is about $100M of the $150M they have in the bank.
In THEORY, they should be able to squeek it out and lose less than $50M next year and then break even in 2017 and then PROFIT in 2018 and that may sound dull to you but I see a store that sold $600M worth of crap last Q ($2.4Bn run rate) and lost $13M in the midst of a restructuring so if I'm Gap (GPS) with my $15.7Bn market cap and $1.2Bn in income on $16Bn in sales (7.5%) and I want to start a new brand in 800 new stores - here's ARO that's already got $2.4Bn in sales with infrastructure costs I can cut right away and I KNOW I can make $180M a year on $2.4Bn so buying ARO at $140M is kind of a no-brainer as I get 800 fully staffed stores for free.
