Pickle Quarterly Numbers Reviewed: As Expected
May 13, 2008 @ 9:50 am
SPKL filed its Q1 10Q yesterday afternoon, and the filing really contained no surprises. The market is responding in kind my delivering another quiet day of trading with the stock still trying to get through the $.90 and stick higher than that level.
The top line number was $625k in revs- up from $221k in the same quarter in 2007. That nearly a triple in top line performance- 182% revenue growth to be exact.
The quarter was reflective of exactly what the company has been saying it was doing- investing the $6 million raised at $.85 per share last December into expanding it’s company owned store portfolio.
If you are wondering about the current state of restaurant openings and future openings, here’s a quote directly out of the 10Q:
As of May 3, 2008, we have sold 127 franchises. Of the franchises sold, 31 franchise restaurants are opened and operating, 1 company-built and owned restaurant is open, 5 franchise restaurants have been repurchased by the Company, 6 franchise restaurants are under construction, 2 company restaurants are under construction, 6 franchise sites are under lease negotiation (we have either received an actual lease that is being reviewed or a letter of intent), 1 franchise restaurant closed and 75 franchise sites are subject to area development agreements. An area development agreement is entered into when a franchisee has purchased the rights to a geographic area with a set number of restaurants in that area.
As you can see from this statement, it is very reasonable to expect continued growth from SPKL long out into the future.
At the end of the quarter, SPKL still had about $3.6 million and cash, and no long term debt.
The only real liability on the balance sheet is about $1 million in deferred franchise fees. This debt is really the fuel for growth. This liability is, in fact, the franchisee fess already paid into the company for expansion. It is shown as a liability on the balance sheet until the restaurants represented by the franchisee fees open for business. Then, the liability is converted to revenues as SPKL has fulfilled its obligation to get the store open. As that number goes down, the number of stores goes up. I would like to see the number go up, as that means more franchises have been sold.
As far as losses go, the company lost about $1.5 million, or $.03 per share. I would expect the losses to continue throughout 2008, and improve to a profit or at least cash flow positive in 2009.
New store openings are now picking up, with several on the horizon.
Here’s the current chart:
This is a slightly ascending wedge. The market is just grinding away at that $.90 resistance point. Sooner or later, it is going to break out, and bust north. When it does, it needs to work its way higher than $1, to set up a pattern of higher lows and higher highs.
It’s tough to say where this stock might be in the next two weeks, but the company is proving its worth everyday with new franchise sales and new store openings. If you can see out a year or two, this company should be far more valuable than the current $42 million market value it commands.
There aren’t many fast casual chains growing at this clip. If you’re not a believer yet, go try the food.
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I’ve been watching Spicy Pickle ever since it was featured and at its current levels, (in the 70s), is this a spectacular buying opportunity? It seems someone is dumping, so volume is higher, but no buyers out there. Is this just because of the summer-time blues and anemic environment for small caps? At these levels, it seems maybe something else is going on. Do you have anything to add? Thanks!
Editor: I wouldn’t describe it as a spectacular buying opportunity at this time. I think it is at a great level to accumulate. However, as I have pointed out many times in the past, the best time to really pounce on these low volume pullbacks over the summer months is around the end of July and into early August. This year we are dealing with a bear market and a consumer sensitive stock in a terrible US economy. When the cycle changes, this stock will come back to life. My guess- if you buy in about one month, you are a lot higher by the end of the year. This is just my guess at this point. October has been the bear killer many times, so I’m hoping that will be the case.
Comment by Kevin — 6/25/2008 @ 9:54 am
SPKL ADVERTISED (AS PER YOUR MANY BLOGS) BY YOU AS A LONG TERM IDEA, NOTICING ON THE FIRST PAGE OF YOUR WEBSITE THAT IT REACHED $2.02 AND YET IT IS NOW .71.
DID THE FOOD TURN LOUSY??
ARE YOU SELLING YOUR HEAVY POSITION??
DID I MISS WHERE YOU SAID GET OUT AT 2.02 AND BUY BACK AT .71 - MAYBE I AM STUPID.
MICHAEL
Editor: Michael, apparently, you did miss it when I said to sell at $2.02. It’s not complicated- all you have to do is go back into the archives on the web site and read the content. Simply go to:
http://www.otcjournal.com/otcb/category/followed-companies/spkl/
and toggle down to the BLOG from October 17, 2007. Here’s a quote: At this point I believe the stock is going up because it is going up, and I also believe it is overvalued at this level. I have been a seller, and will continue to be at this lofty valuation.
I’m not even sure it’s a screaming buy quite yet. I’d wait until the end of this month. Perhaps it would serve you well to read my views on non energy microcaps in the current market climate and the way micros behave in the summer months. As I have been saying, if you are not a long term investor, get out. This market and this stock are not for you. I have not done a trade in this stock for months, because I have decided to hold for the long term. Therefore, I am not worried about the summer/recession lows.
Comment by Michael — 6/25/2008 @ 8:12 am
well here we are in June and you the rest of the .85 Dec buys are selling I guess you had to pay for you vacation. at the cost of the rest of the share holders
Editor: I haven’t done a trade in the stock in months, and there have been very few conversions out of that financings. However, if it worries you, sell the stock and get out. If you are still holding it, you should have a long term mentality. We are in the middle of the summer doldrums in a consumer stock in a recession. If you can’t see what that means, you are an ostrich with your head in the sand. I have decided to be long term with my shares, so I’m not worried.
Comment by Anonymous — 6/24/2008 @ 10:35 am
With you having so many share of SPKL which you own very cheap and can sell at will, how is it possible for this stock ever to get off the ground. It seems lke a very unfair playing ground.
It seems like you always make, but your shareholders get stuck holding the bag with promises of BIG GAINS D O W N T H E R O A D
Your opinion would be appreciated.
Editor: I own the majority of them very cheap because I wrote the checks out of my own pocket when the company had ten stores and the possibility of opening 30. Now there are 42 going to 130 plus, so I’m entitled to be up a substantial amount. I made the investment over two years ago. I also bought about 130,000 shares at $.85- I put in $102k, so not all my shares are looking that great. However, you are making a mistake worrying about my shares as being a problem. The real problem is the sector and the market. Anything non energy in microcap stocks during the heart of the summer is trading very poorly. I have written about this extensively. We are in the middle of the summer doldrums, and this is a stock that depends on US consumers for business. Therefore, for the time being, the market simply won’t like it. I haven’t done a trade in the stock in several months. I have decided to simply wait out the market cycle related to the recession and hold through to the next bull market to see where we go. I believe it will start in September, but it might not. Can’t say for sure. If you still own this stock in this market, you should be a long term investor, and therefore no so worried about where it goes over the summer. If you are not long term, get out. There are no trades in stocks like this in this market.
Comment by Michael — 6/24/2008 @ 7:17 am
Well, I have to say “I don’t get it”. Here SPKL is, mid-eighty cents, below your .90 SSL, having great news and going nowhere. Something doesn’t compute. There’s something that we don’t know that some significant holders do know. It can’t just be the lousy market. It’s a market of stocks, and stocks can have great stories and be doing well while the general market sucks. Any insights would be appreciated.
BD
Editor: Not much of a mystery here. It’s a company that sells a consumable product to US consumers. Therefore, for the moment, no one cares. Despite the fact that same store sales are up and the company is growing, the volume is just not there. Then, I publish a piece on a small oil and gas company, and it trades 5 million shares in a day. It’s simply a sector issue now, and when the money flows back into ideas like this in the next bull market, it will do well again. This is an easy one to hold long term because the growth is there, and the stores are doing very well even in this recession. However, we going right into the teeth of the summer doldrums, and low volume pullbacks are the norm seasonally for now.
Comment by Biodigger — 6/20/2008 @ 12:52 pm
Well, my wife and I finally took a vacation and where did we end up… the windy city. Being on vacation with a wife who LOVES to shop and walk around town, we started the day in the Lincoln Park area, must have been around 8:00 am, as we’re heading past the entrance to the “subway” a guy is handing out menus to the “Spicy Pickle”…HOLY S**T I say to my wife (who by the way is oblivious to the stock market). As she turns around and looks at me like I just grew another head, I said , oh by the way we own 12,000 shares of this company. (Boy it’s amazing how interested she got all of a sudden!)
It turns out the store was right around the corner from where we were staying. You know as an investor I wanted to see how many people were in there ordering, how many tables were filled. The place was small but clean, in the afternoons they had a line of 4-5 people waiting to order, they service was rather quick, of course we tasted to food and would have eaten there more if we didn’t already have reservations for the entire week. We walked by every day multiple times a day I’ll be honest, I’m convinced we have a potential winner on our hands. On our way home from the airport my wife suggested that we invest a few more bucks in the stock. I agree!
Editor: As I have been saying, there’s nothing like experiencing the product yourself. I have heard that Chicago store is not one of the best volume wise. Too bad you didn’t go into the Vegas store that has a line out the door everyday. However, from day 1 it has been my feeling the food offers people something a little different in that fast casual space. Glad you liked it. It will be a much larger chain someday. Finding the right locations continues to be the biggest challenge. 90 more to open today.
Comment by Ron — 6/17/2008 @ 7:05 pm
You wrote: “Editor: Irv- I hope you liked the food as well. Thanks for your contribution. I haven’t heard much about that particular store, but I know there are a couple of other potential franchisees looking to expand in that area. To me, it’s all about the food. It’s simply a different and better offering than the same stuff we’ve been seeing forever.”
Yes, I did. I had the sausalito bandito and thought it was great! My coworker had the Bastille.
Editor: My favorite is the Adobe. Glad you liked the product.
Comment by IrvT — 5/21/2008 @ 8:23 am
I went back to the Ashburn, Va. store today. This time it was toward the end of the peak of lunch hour. I was pleased to see that the place was doing a brisk business.
I took a co-worker with me and afterwards I asked his opinion of the food. He liked the panini very much, but said the pickle was too hot. I asked him if he would go back there sometime on his own, and he said that he would.
The franchise owner was very friendly, walking around checking with his customers to make sure that everything was to their liking. In asnwer to one question I posed, he said that he hope to open a second store in the Loudon County area (Loudon is one of the fastest growing counties in the country), but that due to the state of the economy that would be at least more than a year in the future. He clarified that the new one he hopes to open is not the one listed on the SPKL website as being in development. So, if his plans work out that would make at least three locations in the northern Virginia area, just a few miles outside of Washington D.C.
Editor: Irv- I hope you liked the food as well. Thanks for your contribution. I haven’t heard much about that particular store, but I know there are a couple of other potential franchisees looking to expand in that area. To me, it’s all about the food. It’s simply a different and better offering than the same stuff we’ve been seeing forever.
Comment by IrvT — 5/19/2008 @ 11:26 am
I like your short idea, on the QID; way too much complacency. BTW, check out your old friend BPTR, which you use to cover. They had a huge quarter making almost two cents per share, but no one seems to care, the stock is still trading at .06.
Editor: Wow- the banks being in turmoil must be an opportunity for them. There’s another company that had a good, profitable year or two, but couldn’t sustain it. Stock traded great for a while then fell apart.
Comment by denmen — 5/15/2008 @ 2:58 pm
Are you keeping an eye on the VIX?
Editor: Ralph- you’re the man. Check today’s BLOG. I went short today by buying QID- it will trade up 2 for 1 to the QQQQs if it goes down. The VIX is featured in the BLOG posting. More over the weekend. Options expiration will skew everything tomorrow, so I might be a day earlier. However, I am prepared to go deeper.
Comment by Ralph Vaccaro — 5/14/2008 @ 5:14 pm