Next week comes one of the most love-it-or-hate-it holidays of the year: Valentine’s Day.
Countless anti-romantics (and singles) think Valentine’s Day is simply a made-up holiday to suck more money out of us. And regardless of your personal passion or disdain for next Thursday, one thing seems true: That’s good for companies that cater to its traditions … right?
Well, the “cost of loving” is up around 2.5% this year. (Yes, that is a metric — the result of an index that measures prices of the most popular gifts that will be doled out to loved ones). So that could put more money into those merchants’ pockets. In theory, anyway.
In reality, Feb. 14 doesn’t always translate to profits or mean related stocks are a buy … in fact, some obvious picks for the holiday are bound to break your heart.
Let’s take a look at a few companies that will be hocking their wares to romantics in the coming week, and whether you should love or leave their stocks:
1-800-FLOWERS: Leave It
Flowers might be one of the most common gifts for the holiday, but I’d stay away from 1-800-FLOWERS (NASDAQ:FLWS).
FLWS makes most of its profits in the last three months of the year, and hasn’t posted a profit for the quarter including Feb. 14 in four years. But more importantly, in four of the past five years, FLWS shares have bled red between the week before Valentine’s Day and mid-March.
Sure, things could be looking up. The stock gained an eye-popping 67% in 2012 and is up another 7% so far in 2013 after more than doubling its earnings in the past year. That growth wasn’t very organic, though, as revenue only gained 4%.
I’d still be skeptical about diving into this relationship long-term.
Cheesecake Factory: Love It
Valentine’s Day isn’t complete with out a romantic dinner and — for those who don’t want to opt for a homemade dish and bottle of wine — Cheesecake Factory (NASDAQ:CAKE) is a popular destination.
Cheesecake Factory has a nice little niche in the restaurant world. Well, maybe not little — the cheesecake list alone is mesmerizing, and the menu has more listings than a dictionary. Plus, it’s the perfect mix of being a relatively upscale eatery — unlike Darden Restaurants‘ (NYSE:DRI) Olive Garden or Red Lobster or Ruby Tuesday (NYSE:RT) — but still reasonably priced enough for the middle-of-the-road Americans.
Thus, we have a romantic stock that is worth getting starry-eyed over. The chain is looking good thanks to 11 straight quarters of revenue growth and solid 12% gains in the past year. With expectations for 16% and 12% earnings growth for the next two years, respectively, Cheesecake Factory might not be a stud, but it still looks pretty good.
CAKE reports earnings on Feb. 20.
Build-A-Bear: Leave It
What better way to say “I love you” than by going to a store, picking out the hide of a teddy bear, stuffing it, dressing it up and giving it to your love interest?
OK, fine, I can think of plenty of better ways to express affection. Still, stuffed animals are a go-to gift for many on Valentine’s Day.
Too bad Build-A-Bear (NYSE:BBW) is just about anything but a go-to stock.
The company has only posted a profit in three out of the past 15 quarters. BBW is expected to report a better quarter come Valentine’s Day (it reports Feb. 14), with expectations for a profit (hooray!) of 31 cents per share, but it also has a history of disappointing.
Two quarters ago the company was expected to lose 26 cents per share but lost 46, and last quarter it posted a surprise 26-cent loss against expectations that it would make 10 cents! In the most recent full year, the company lost 98 cents per share on a 2% slide in sales.
Analysts still expect a 47-cent loss for full-year 2012. That’s expected to improve in 2013 — to 15 cents in the red. You deserve better.
CVS: Love It
For last-minute (or reluctant) shoppers, CVS (NYSE:CVS) is the place to go. You can snatch up a Hallmark card, a Whitman’s Sampler, a heart-shaped box of Hershey‘s (NYSE:HSY) chocolate … and so much more.
If you’re looking for a decent stock pick, you can find that here as well.
The drugstore is a member of InvestorPlace‘s Real America Index because it’s the No. 1 provider of prescriptions and the No. 1 specialty pharmacy in the country. That plays a role in its solid growth prospects, including estimates for a 13% annual increase in earnings in for the next five years that best the average estimate of 9% for the S&P 500. And just recently, the company posted earnings growth of 6% on revenues that improved 11% for Q4 2012.
CVS shares gained 19% in the past year to trump the S&P 500’s 11% gains, and still trade at just 11 times next year’s earnings. What’s not to love?
Zale Corp.: Leave It
Don’t be fooled by the rocks that it’s got; Zale Corp. (NYSE:ZLC) doesn’t have much to offer besides a shiny showcase of jewels.
Zale just can’t turn a profit. It has booked seven straight quarters of revenue growth but hasn’t made money in the past four years. The company’s earnings actually have declined 78% in the past half-decade, and in the most recent quarter, the company posted a loss that was 20 cents — or nearly 30% — worse than analysts were expecting.
You wouldn’t know it by looking at ZLC shares, which have climbed 72% in the past year. Still, at $5 per share, the stock still is well off its pre-crisis levels around $30, and it essentially has traded flat since it took a vicious post-earnings beating in November.
The only good news is that analysts are indeed expecting a profit this quarter when the company reports Feb. 21, but that number has been revised down in the past three months. The shine is fading from this bling.
As of this writing, Alyssa Oursler did not own a position in any of the aforementioned securities.