5 Comeback Companies

What do a retailer, a theme park, a doughnut-maker, a tech giant and an insurance firm have in common? All five companies were once struggling but have since managed to engineer a comeback.

Here’s how these names made it happen.

GapGap

Things are looking good for Gap these days. Once criticized for its fashion missteps, the retailer saw its fourth quarter profit increase 61 percent year over year. Gap’s operating margins have also improved, and its same-store sales for April increased 7 percent.

Investors are reaping the rewards. Shares are up 30 percent this year, and 78 percent over the past two years—doubling the performance of the S&P retail index.

The turnaround didn’t occur overnight; it took nearly a decade.

So how did it happen? Wall Street credits better merchandise and new talent, as well as an improved supply chain and e-commerce business.

“They have done a great job of controlling expenses and building the business for the long term,” said Ed Yruma, a retail analyst at KeyBank. “What’s been interesting of late is the product has really turned and they’ve embraced the message of really what Gap stands for.”

However, some question whether the company’s strength is sustainable. Sterne Agee has given shares an “underperform” rating and KeyBank has a “hold” on the stock.

-Reported by Courtney Reagan

YahooYahoo

The Yahoo of today looks much different than the Yahoo of a year ago.

Back then, shares were down, morale was low, and there seemed to be a revolving door to the CEO’s office. Four CEOs came and went in as many years.

But since Marissa Mayer took the helm last July, the stock has soared nearly 70 percent, the home page has been redesigned and Yahoo has become a place where people want to work. And on Monday, Yahoo said it will be buying blogging website Tumblr for $1.1 billion cash.

“I’ve known Marissa for a long time, and I knew her at Google. One of the things she always did extremely well at Google, what she’s doing at Yahoo, too, is building teams and hiring people,” said Matt Cohler of Benchmark Capital Markets.

But questions remain about whether Yahoo can grow its stagnant advertising business and if the stock’s ride is because investors are hoping for a payout from a possible IPO of its Chinese e-commerce business, Alibaba.

“The issue here is the stock is moving because people are valuing Alibaba and expecting the IPO to hit later this year or early next year,” said BCG technology analyst Collin Gillis. “And the valuations that they’re throwing out for this company I think are going to prove to be too optimistic.”

-Reported by Jon Fortt

AIGAIG

During the financial crisis, AIG was the poster child for bailed-out companies, having received $187 billion from the government.

These days, the insurance company is a slimmer version of what it once was. It sold 27 businesses and repaid the government. The result–a firm with two core businesses: a global property and casualty unit and a domestic life insurer.

“I think it’s a simple company, more focused company. So, therefore, in my mind, easier to manage, and one that I think is more secure,” CEO Robert Benmosche said.

AIG’s stock has doubled since 2009, and the company’s property and casualty business is improving thanks to better underwriting and higher rates.

However, investors looking for dividends and buybacks will have to wait until AIG satisfies the concerns of some credit rating agencies. Then they’ll have to wait to see if the Federal Reserve becomes the regulator, because the Fed will have ultimate approval over any dividend AIG pays.

-Reported by Mary Thompson

Krispy KremeKrispy Kreme

Krispy Kreme had a frenzied IPO back in 2000, but its skyrocketing stock soon plummeted after the company expanded too fast.

Things are looking up again for the doughnut maker. Krispy Kreme has reported 17-straight quarters of same-store sales growth, and its stock has outperformed rivals like Dunkin Donuts. It also plans to expand from 540 stores to 900 by 2017.

CEO James Morgan said his company is different from Dunkin Donuts and Starbucks.

“They’re largely beverage companies, and we’re a doughnut company,” he said.

However, coffee is a part of Krispy Kreme’s growth plan. It represents only 5 percent of Krispy Kreme’s revenues, compared with 60 percent for Dunkin Donuts.

“I think the company can be a lot better, a lot more successful, and a lot more smarter year by year,” Morgan said. “And I’m not sure everybody fully realizes that. I think sometimes they think it’s just a doughnut. It’s not just a doughnut.”

-Reported by Jane Wells

Six FlagsSix Flags

Investors in Six Flags have been on quite a rollercoaster ride. The stock had been soaring, but three years ago the company fell into bankruptcy.

Now the company has new management and a new strategy.

CEO James Reid-Anderson, a turnaround specialist, is focused on making the company a regional theme park leader instead of trying to be all things to all people. He wants to boost revenue, improve operating efficiency and reinvigorate the brand.

“We have new attractions, new shows, every single year at every single park,” Reid-Anderson said. “And we tell our guests about that so they know to come back to our park on a regular basis.”

Since Six Flags emerged from bankruptcy in May 2010, its stock is up more than 300 percent. The company bought back $404 million shares last quarter and announced a 2 for 1 stock split.

Attendance in the parks is also up, from 23 million in 2009 to 26 million now, according to Reid-Anderson, and first quarter revenue increased 30 percent year over year.

However, no business is without risks. For Six Flags, bad weather, tough economic conditions and disease scares could all have an impact on revenue.

-Reported by Jackie DeAngelis

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