I got a teaser from Tobin Smith's NBT Equities Research pumping LuxeYard (LUXR), some kind of online shopping site for luxury goods. I can pretty much tell what kind of future this one has without even looking at its financials.
I've spent enough time mingling with affluent types and their aspirational hangers-on in San Francisco to understand how they shop for luxury goods. Wealthy people like to fondle expensive goods before making a purchase, just like a predator cat plays with its prey before making the kill. The thrill of the chase for a rich person creates an ecstatic endorphin rush from possessing something that less-competitive peers can't acquire. Rich folks also like to be seen shopping in public because they love it when their friends in high society see them throw down a few thousand bucks on a handbag. Such behavior burnishes a wealthy person's reputation. It's imperative to many rich people that they are publicly known as having plenty of money to burn. They also value having relationships with salespeople who work in high-end retail because they love having lesser human beings at their beck and call. All of these psychological entanglements preclude an online shopping experience from ever displacing upscale retail outlets as the purveyors of luxury goods. The only online shopping a rich person would ever be willing to do would be to buy a book or CD on Amazon; those items don't come in luxury models.
Now that I've deconstructed the rationale for LuxeYard's existence, let's look at their fundamentals anyway. They lost over a million bucks last year while revenue was negligible. They ended 2011 with $300K in cash but with a free cash flow of negative $714K they'll burn through whatever cash they get in no time flat. Oh yeah, this year they took on over $8M in debt. This liability reflects the issuance of convertible preferred shares, for which the company obtained $2.6M in net proceeds. This makes further dilution inevitable, so shareholders can look forward to stock worth even less than the current $0.39/share. I'll give them a tiny amount of credit for scoring revenue of $155K in Q1 this year (according to the 10-K dated May 15, 2012) but their cost of goods sold was over $211K in the same quarter. The more goods they sell, the more money they lose.
Way to go, LuxeYard. Pile the lead ballast even higher on a sinking ship. Amazon does online merchandising right because they sell cheap commodified products. Luxury goods don't move that way.
Full disclosure: No position in LUXR, ever.
I've spent enough time mingling with affluent types and their aspirational hangers-on in San Francisco to understand how they shop for luxury goods. Wealthy people like to fondle expensive goods before making a purchase, just like a predator cat plays with its prey before making the kill. The thrill of the chase for a rich person creates an ecstatic endorphin rush from possessing something that less-competitive peers can't acquire. Rich folks also like to be seen shopping in public because they love it when their friends in high society see them throw down a few thousand bucks on a handbag. Such behavior burnishes a wealthy person's reputation. It's imperative to many rich people that they are publicly known as having plenty of money to burn. They also value having relationships with salespeople who work in high-end retail because they love having lesser human beings at their beck and call. All of these psychological entanglements preclude an online shopping experience from ever displacing upscale retail outlets as the purveyors of luxury goods. The only online shopping a rich person would ever be willing to do would be to buy a book or CD on Amazon; those items don't come in luxury models.
Now that I've deconstructed the rationale for LuxeYard's existence, let's look at their fundamentals anyway. They lost over a million bucks last year while revenue was negligible. They ended 2011 with $300K in cash but with a free cash flow of negative $714K they'll burn through whatever cash they get in no time flat. Oh yeah, this year they took on over $8M in debt. This liability reflects the issuance of convertible preferred shares, for which the company obtained $2.6M in net proceeds. This makes further dilution inevitable, so shareholders can look forward to stock worth even less than the current $0.39/share. I'll give them a tiny amount of credit for scoring revenue of $155K in Q1 this year (according to the 10-K dated May 15, 2012) but their cost of goods sold was over $211K in the same quarter. The more goods they sell, the more money they lose.
Way to go, LuxeYard. Pile the lead ballast even higher on a sinking ship. Amazon does online merchandising right because they sell cheap commodified products. Luxury goods don't move that way.
Full disclosure: No position in LUXR, ever.
