What a disappointment. Leading up to this earnings announcement they have been touting acquisitions and low cost of $$ as way to continue to make their numbers. I guess that was a wish or maybe they wanted to pump things up before the poor earnings numbers so the fall would not be so far. Any case I am bummed, I really like these guys, but their PR machine seems to be running out of gas. Retail credit is contracting on top of large loss rates and Retail makes up even more of their business with the Charming shops acquisition. I do not see how they can continue their growth rate in the markets they are in. Their story has been that they want to reduce their reliance in Retail. I do not see it by their moves with Charming shops, it just gets worse.

As pointed out in recent articles, their accounting games seem to be wearing thin with the analysts. See this article and the comments on their current earning release.

http://www.nytimes.com/2009/07/26/busine...

This will just get worse as they play the acquisition accounting game. They started all of this with the failed sale to Blackstone and seemed to use every excuse they possibly could to make the numbers look good. It also appears they lost a lot of talent and bet on some new horses in that process which adds to long term issues. Now they have the Charming Shops acquisition accounting and the new Brazilian acquisition accounting to hide the dirty laundry in. So I assume accounting will stay fuzzy

Setting this aside, I do not see how they continue to grow at the rate they are selling to the shareholder. Can someone help me out here? Let’s look at some simple math.

1. portfolio growth rate of 10%
2. Loss write offs of 9% to 10%
3. Anemic growth in other business areas
4. Rising cost of doing business

I see a net ZERO model? I know it is much more complex than this with all the accounting games…..but these are the big impact variables. As their cost of money goes up with Fed tightening I just do not see it. Right now their cost of money is near zero and they have a tough time making money. Their earnings call did not paint a path to growth in 2010 either.

I see a slowing business model in a credit contracting market where mgt is grasping at ways to deliver the growth of the past....and nothing seems to work. They abandon what they know, bleed talent, and play accounting games. They have stated Retail is a dead end road, but continue to invest in it. Where do they go from here? What I see is an effort to use Retail as a bridge to earn some $$ while they continue to try and transform. Unfortunately the market will only reward them for growth that they do not seem to be able to deliver. They are slotted as a mid cap growth company. Where is the growth going to come from? I hope they figure it out soon. Time is running out and the games appear to be getting old. Can someone paint a clearer picture for me? Thanks in advance!