Arts, Crafts, and Profits

10/01/2002 12:00 am EST


Vahan Janjigian

Editor, Bottom Line's Money Masters Stock Report

The Forbes Growth Investor employs a proprietary system called its "Quant Model," which conducts a computer analysis of 3,000 target stocks each month. Based on this quantitative filter, the service seeks to isolate the best growth and momentum stocks for current purchase. Impressively, this Quant Model has outperformed the S&P 500 by 362% over the past ten+ years. Editor Vahan Janjigian discusses a recent featured addition to the service’s portfolio.

"A.C. Moore (ACMR NASDAQ) is a burgeoning retailer of arts and crafts supplies. The company has 67 locations along the East Coast. It is benefiting from an aging population and a growing interest in home-based, family-oriented activities. Growing demand is good for any business. But to really ensure success, a sound business plan and proper execution are critical. This is where ACMR shines.

Borrowing from the superstore concept implemented by retailers such as Wal-Mart, Barnes & Noble, and Home Depot, each of A.C. Moore’s stores houses between 20,000 to 25,000 square feet of selling space. Large size allows the firm to offer more than 60,000 stock keeping units throughout 40 merchandise categories. Stores are decorated with sample projects and staffed with highly knowledgeable personnel.

Most important, however, is that the superstore concept allows ACMR to benefit from two key features inherent in its design: one-stop shopping and lower prices. The latter is particularly crucial in today’s price-conscious environment. Due to its size advantage, ACMR can maintain lower prices without sacrificing quality. As a result, the company had the highest average sales per square foot figure ($273) in the industry in 2001.

Business is so good at ACMR that the board of directors recently approved a 2-for-1 stock split. Sales rose 23% year over year for the second quarter to a record $82.9 million. Net earnings were $0.06 a share (pre-split). The outlook for the remainder of the year is very promising. Full-year sales are expected to grow by at least 20%."

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