Students Of Success

Poker has been around for a long time. Lately, this does not happen only in the casinos but also in television as well. To those who want to play for fun, getting something similar to the real thing will help and that includes the poker chips.

People will agree that this is better than using peanuts or toothpicks when playing the game. Chips represents real cash that adds a certain level of thrill which is what gambling is all about. Those used for the home usually come in 4 colors in 10, 25, 50 and 100 denominations.

Casinos use poker chips to represent a certain amount of money. The chips used in the usually weigh between 9.5 to 10 grams each and range from a dollar to five hundred dollars.

Poker chips are made of different materials. For those who want to get the cheap kind, the one made of plastic will do. These thin layered chips usually come in the standard colors of red, white, yellow and blue that can be purchased at the local toy store.

For people who want something similar to the real thing, then investing in the kind made of clay is better. These chips come in different sizes and weight that correspond to a certain value of money.

Since the price range of both differ by a huge margin, the person must think how often it will be used before buying it. In between these two, there is a kind that is made of metal weight which people can also buy.

After deciding which kind to buy, the next thing to think about is how many chips to buy. A standard game starts with each player having 80 chips. If there are always four players playing, then getting a little over 320 chips will be just fine.

Poker chips can also be custom made to the specifications of the customer. This may come in different colors and designs with a personal logo that will surely make it stand out during every card game.

To make sure that these don’t get lost, it is best to invest in a plastic rack to hold the chips when these are not being used.

Poker chips can also be bought in a set so that the individual does not have to buy a rack to hold it. The price range of these items can be from $5 to around $250. This can be bought in a toy store or in the shops that specialize in gambling accessories.

Should this appear to be expensive, then another option is ordering it from the web which can be delivered in a few days.

Casinos use poker chips to make sure there is order on the table. This is also used to monitor how much money is on the floor. Surely, everyone will agree that this is better than putting cash on the table which can be confusing and messy since these could also get lost.

To those who play this often, it will be a good idea to buy one for the home. Poker is not the same if it does not feel like the real thing. By using cards and poker chips when playing the game, it will really make the players take the game seriously which makes it both fun and exciting.

Claire Bowes is a successful Webmaster and publisher of My Poker Tips. Claire provides more information on her site about Live Poker Rooms that you can research at home..

Lo carb diets are the newest dieting trend, and seem to be effective. Here are some tips for following a balanced lo carb diet:

Eat more fruit and vegetables, aiming for at least five portions a day. Include fruit at breakfast and salad at lunch. Reduce the amount of salt by eating less processed food, such as ready meals, and adding a smaller amount of salt to food. Eat a varied diet. Change your shopping list every week to help keep you out of unhealthy food ruts and make eating more enjoyable. Eat regular meals - although it doesn’t matter when you eat your food, a consistent schedule helps most people to control their diet and their weight. Control your portion sizes so that over time, if not necessarily every day, the amount of energy you consume matches your level of activity. Try to be more physically active. Aim for 30 minutes of physical activity on most days of the week. Activity helps to regulate your appetite, and means that you can eat more without gaining weight. Drink alcohol only within sensible limits: not more than 14 units per week for women, and no more than three in any one day, and not more than 21 units per week for men, and no more than four in any one day.

The current most popular fad diet is the Lo Carb or Atkins diet. It restricts carbohydrate rich foods, thereby restricting total daily calories. Phase One of the four in the Atkins Diet consists of between 1400 to 1500 total daily calories. The average adult female consumes around 2200 calories daily and the average adult male consumes around 2800 calories daily. Almost any adult will lose weight if they consume 800 to 1300 fewer calories daily. Phase One of the Atkins Diet also restricts carbohydrate intake to only 20 grams of net carbohydrates daily. The definition of net carbohydrates is total grams of carbohydrates per serving minus dietary fibre per serving. Dietary fibre is the non-digestible remains of plant products found in beans, whole grains, fruits, and vegetables.

Carbohydrates are the body’s preferred fuel source. In the near future there will be a recommended dietary allowance, or R.D.A., for carbohydrates of 130 grams daily. 130 grams of carbohydrates our body needs daily is for the proper functioning of the central nervous system and production of red blood cells. Only during Phase Four of the Atkins Diet are participants allowed up to 120 grams of net carbohydrate daily. Low carbohydrate diets are nothing new, they have been around since the 1860’s and the Atkins Diet first came out in the early 1970’s.

Most nutrition experts agree that to be successful in weight loss a person needs to keep the weight off for 5 years. Over 90% of people who take weight off through a fad diet like the Atkins Diet gain the weight back in less than one year. Participants on the Atkins Diet lose between 10 to 12 pounds in the first several weeks but this is only water loss, not fat. One pound of fat contains 3500 calories. Therefore to lose 10 pounds of fat in several weeks you would need to consume 35,000 fewer calories or burn 35,000 calories more through exercise. Neither is likely to happen.

So, the best way to lose weight and become more healthy is to eat a balanced diet. Don’t cut out all your carbs, but don’t go overboard with them either. In addition to eating well, exercise in a proportional amount to what you are eating. Exercising too much is as bad as exercising too little.

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So you’ve decided to create a website? The most obvious thing
that you need is of course web hosting. Among other things, like
cost and features, you’ll need to decide which server you’ll
need: Windows (NT, 2000 or XP) or Unix (Linux, FreeBSD, OpenBSD,
etc.). Both have their merits, so the first thing you should
think about when making this decision is if you are looking for
stability, or ease of use. UNIX based servers are generally
superior in the site up-time and stability areas than Windows
systems. However, while they need to be rebooted more often,
Windows servers are generally easier to administer and use. Many
beginners to web hosting will be confused over the pros and cons
of the different operating systems. While, Unix is more stable
and secure it uses a command line interface for administration.
This interface, which is like the original MS-DOS interface, can
be difficult to understand to a website newbie. Also, in order
to keep a UNIX machine stable, one must update the kernel and
software regularly, a process which is more difficult than
Windows. This however, can be made just as easy to do if your
web host has good administration software.

Another thing to consider when choosing which operating system
to use is whether you will be using scripting. If so what kind?
For example, if you will be using a dynamic site, and decide
that you want to go Perl as your language of choice then UNIX
should be your operating system of choice. This is also true for
languages such as PHP, and Pythlon. On the other hand, if you
choose to go for an ASP based site then you should choose
Windows. However, to complicate the matter further some UNIX
systems can run ASP scripts, although the quality of the script
execution can be lesser.

Bare in mind that if you choose a Windows-based web server (this
does not apply to hosting accounts as the host should take care
of it for you) you will need to update the software with patches
from Microsoft’s web site almost weekly to prevent your site
from being exploited. UNIX administrators will only have to do
so monthly or so as UNIX is more secure by nature, and needs
fewer patches and software updates.

Unix operating systems are generally the preferred operating
system, however, in the end, if you do everything correctly, a
UNIX hosted web site and a Windows hosted web site will function
somewhat equally, and both should make you happy. Be sure to
keep operating costs and maintained in mind when making your
decision and you won’t regret it.

Pacific Sunwear (PSUN) operates two mall based retail chains: PacSun and d.e.mo. PacSun is a nationwide surf and skate themed chain with about 900 locations comprising approximately 3.25 million square feet. d.e.m.o. is a hip hop themed chain with about 200 stores comprising approximately 500,000 square feet. Both chains target the “teen” market (specifically, guys and girls ages 12-24).

Locations

Nationwide, PacSun operates approximately 800 PacSun stores and 100 PacSun Outlets. Unlike PacSun stores, which are very evenly distributed on the basis of population, PacSun Outlets are skewed towards highly populous states with large areas of extraordinarily high population density (”suburban sprawl”). The only exceptions are Virginia, North Carolina, and Louisiana. While the number of stores in any one state is small enough that the disproportionate concentration of PacSun Outlets in these states may be purely coincidental, I doubt it.

More likely, PacSun Outlets in these states are meant to benefit from the expected population growth in their surrounding communities, and were developed because of the danger of saturation in states such as New York, New Jersey, Maryland, Michigan, Illinois, and California. I have not heard management discuss this matter. So, it is pure conjecture on my part. It will be interesting to see where the new PacSun and PacSun Outlets are located.

For the most part, PacSun stores are not unusually concentrated in any state or region. In fact, they are eerily evenly distributed relative to state populations. It is likely management has intentionally acted to ensure an even distribution of PacSun stores across the U.S. As a result, regional economic and demographic trends will have no material effect on PacSun’s operations.

d.e.m.o. stores are not (yet) as evenly distributed. They are disproportionately located in Northeastern states, Southeastern states, and California. There are relatively few d.e.m.o. stores west of the Appalachians and east of the Sierra Nevadas. The number of stores in the d.e.m.o. chain is still growing at about 20-25% a year; so, a more even distribution may be achieved in the future. Among teens, hip hop clothing is not limited to the Northeast, Southeast, and California. Therefore, it is unlikely the d.e.m.o. chain will be permanently limited to these regions.

Strategy

Pacific Sunwear’s strategy is to operate two separate, non-cannibalizing chains. Management claims each chain is focused on a different teen “subculture”. I would say subculture is too strong a term (and academics are as guilty as retail executives for stretching the term to the point where it loses its meaning). However, it is true that the two styles, and indeed, the two sets of customers are distinct. There is virtually no overlap between PacSun customers and d.e.m.o. customers.

In April, the company plans to introduce One Thousand Steps, a new mall-based footwear and accessories chain targeting 18-24 year olds. It is very unlikely this chain will prove to be cannibalizing.

Tactics

Pacific Sunwear locates stores in high-traffic malls. The company actively seeks to locate its stores in malls frequented by large numbers of teens, despite the fact that this puts the company in direct competition with rivals such as Abercrombie & Fitch (ANF), American Eagle (AEOS), Aeropostale (ARO), Hot Topic (HOTT), and Gap (GPS). There are malls in which one can find PacSun, Abercrombie & Fitch, Aeropostale, and Hot Topic stores all under the same roof.

PacSun’s footwear offerings have been particularly effective in keeping young men coming back. Shoes, particularly the kind PacSun sells, are a good lure for young men, because men tend to frequent their favorite stores far less often than women do. Even where there are no fashion concerns, shoes must be regularly replaced. Furthermore, males between the ages of 12-24 must buy new shoes, even if there are no aesthetic considerations involved, because old shoes will simply stop fitting their feet.

There is anecdotal evidence for this; but, unfortunately I could not find a study describing the annual change in shoe size for different segments of this age group. There is plenty of data on changes in height for males within this age group. However, it is very unlikely changes in height are concurrent with changes in shoe size. Anecdotal evidence suggests changes in shoe size are more common and more pronounced among males than among females within this age group.

It also suggests changes in shoe size would be more common and more pronounced within the youngest segment of this group. This has important psychological implications, because, if true, selling footwear would tend to cause young men to frequent a particular store at a time when they are more likely to form a habit of shopping there regularly. For instance, one would expect that a male shopper has formed more attachments and stronger attachments to particular stores by the time he is 17 than he had by the time he was 13.

Pacific Sunwear’s stores offer a broad selection of items within each brand. In fact, the company has been responsible for the expansion of some of the brands it carries into new products (particularly footwear and accessories). Pacific Sunwear has encouraged the owners of some of its best known brands to expand beyond their original product and leverage the prominence their brand enjoys within Pacific Sunwear’s stores into nationwide sales of new products.

Pacific Sunwear is able to effect such changes, because the company is usually one of the largest customers for each of its vendors. In several cases, Pacific Sunwear is the largest customer. The company has more influence over vendors than would be suggested by the size of its total sales, because the products it sells tend to have a more limited distribution than the products carried by some of Pacific Sunwear’s larger competitors.

The brands carried in PacSun and d.e.m.o. stores benefit from a greatly enhanced image among the “subculture” they target. These are niche brands that become even more closely associated with their particular niche when they are featured prominently in PacSun and d.e.m.o. stores.

There is anecdotal evidence that a few of the name brands carried in PacSun stores have become so closely associated with the chain, that, within the customer’s mind, the brand’s image and the store’s image have fused. Where a brand carried in PacSun stores is also carried elsewhere, it is almost always much more visible in the PacSun stores, because the target market for PacSun and the target market for the brands it carries are very similar - and the image PacSun projects is relatively undiluted. Other retailers run a greater risk of striking a discordant note.

Merchandise

Pacific Sunwear’s total sales consist of approximately 67% name brand sales and 33% proprietary brand sales. Pacific Sunwear’s two largest individual branded vendors are Quiksilver (ZQK) and Billabong. Both companies are probably still best known for their surf wear; however, they have branched out into other merchandise such as skateboarding and snowboarding apparel and various accessories. Quiksilver is responsible for sales of the Quiksilver, Roxy, and DC Shoes brands; Billabong is responsible for sales of both the Billabong and Element brands.

Each company’s merchandise accounts for about 10% of Pacific Sunwear’s total sales or about 15% of total name brand sales. In other words, about twenty cents of every dollar spent at Pacific Sunwear stores is spent on Quiksilver or Billabong products. These percentages are based on Pacific Sunwear’s company wide total sales numbers; therefore, it is safe to say sales of Quiksilver and Billabong products make up well over one-fourth of all sales at PacSun stores.

Pacific Sunwear’s total sales consist of approximately 65% apparel, 20% accessories, and 15% footwear. Pacific Sunwear has always sold more guys’ apparel than girls’ apparel. In recent years, the gap has narrowed slightly. Currently, apparel sales consist of approximately 55% guys’ apparel and 45% girls’ apparel.

Apparel sales account for a smaller percentage of Pacific Sunwear’s total sales than they had in previous years, because sales of footwear have been growing much faster than sales of apparel. Sales of accessories have grown faster than apparel sales, but slower than footwear sales. Only relative growth is being discussed here; absolute growth has been positive in all categories. Of course, this is not surprising considering the growth in the number of stores operated.

Trends

Recently, growth in the number of total transactions per comparable store at both PacSun and d.e.m.o. has been anemic. However, growth in the average sales transaction was up significantly, allowing Pacific Sunwear to post strong same store sales numbers. Over the last two years, the number of total transaction per comparable store has been virtually flat. Recently, growth in the average sales transaction has been as high as 7-8%.

This may be a short-term trend. Unfortunately, I am not convinced it is. Pacific Sunwear’s performance in terms of growth in the number of total transactions and growth in sales per square foot has not been as strong as the headline numbers suggest. These are two metrics to watch closely in the years ahead.

The general impression given by these metrics (and by much of the other available data) is that the PacSun chain is more mature than Pacific Sunwear’s impressive growth rates suggest. The store count alone might lead some to the conclusion that PacSun’s past growth rates are unsustainable. Of course, every retailer must face this dilemma at some point - and specialty retailers like PacSun must confront the problem sooner than most.

At times, comparable store sales growth at PacSun has outpaced comparable store sales growth at d.e.m.o. The difference has often been small, but that does not make it immaterial. In the most recent period, same store sales were stronger at d.e.m.o. than at PacSun. Still, d.e.m.o. does not have the same potential PacSun did. However, management is intent upon adding new d.e.m.o. stores - and, at present, there is no good reason not to.

Both PacSun and d.e.m.o. have some room for expansion left - and Pacific Sunwear is generating more than enough free cash flow to fund their expansion. The company already has plenty of cash on hand. In fact, it probably has more cash than it can effectively deploy, considering how much free cash flow Pacific Sunwear will generate next year.

Growth

There is still some growth potential at both PacSun and d.e.m.o. However, the attention of most Pacific Sunwear shareholders will likely be fixed on One Thousand Steps, the company’s new mall-based footwear and accessories chain scheduled to launch in April. One Thousand Steps will target 18-24 year olds.

I have mixed feelings about One Thousand Steps. The concept could be a good growth vehicle. Pacific Sunwear needs someplace to put all the cash it’s generating, and a new concept may be a better long-term bet than continuing to expand the PacSun chain.

There is a real danger of overexpansion at PacSun. If things turn negative, Pacific Sunwear will suffer mightily. But, that’s the nature of retail. Between the operating leases and the fixed costs associated with each store, specialty retailers are highly leveraged.

Sales increases produce spectacular profit growth; sales decreases cause a rapid erosion of those profits. It is not realistic to assume that a retailer can get out from under the burden of its stores in the same way marketers and manufacturers can exit a particular line of business. The biggest difference is the speed at which profits evaporate. A specialty retailer has little time to adjust course.

One Thousand Steps has promise. Pacific Sunwear has demonstrated its ability to manage the growth of mall-based chains. The target audience for One Thousand Steps is part of the same age group targeted by Pacific Sunwear’s other two chains. Like d.e.m.o., One Thousand Steps will target a very different segment from existing Pacific Sunwear stores. One Thousand Steps is unlikely to attract the same customers who frequent PacSun or d.e.m.o. Therefore, it should be another non-cannibalizing growth vehicle.

Footwear is a good choice for a new mall-based chain. Generally, most malls have underserved the teen footwear market. Although there are some notable footwear chains, a nationwide comparison by store count suggests there is plenty of room for a new mall-based teen footwear retailer. Teen footwear stores are very scarce relative to teen apparel stores.

The margins on both shoes and accessories are good. Just as important, Pacific Sunwear has demonstrated its ability to successfully sell both types of merchandise. One particularly appealing aspect of selling footwear is the strong appeal of name brands. Obviously, customers form stronger attachments to footwear brands than to apparel brand. This is not surprising given the limited number of footwear items purchased relative to apparel items and the frequency with which any one shoe is worn.

There are important differences between Pacific Sunwear’s two existing chains and the One Thousand Steps concept. Both PacSun and d.e.m.o. sell entire outfits. They offer everything needed to dress in the style of the particular “subculture” they serve. One Thousand Steps will not sell entire outfits. So, the new chain is unlikely to enjoy the same kind of customer stickiness that PacSun and d.e.m.o. enjoy.

One Thousand Steps will not be as distinctive as PacSun and d.e.m.o. For now, it is difficult to say how distinctive One Thousand Steps will be. However, it is safe to say the new chain will be less distinct in the minds of customers than either PacSun or d.e.m.o. That isn’t surprising. Very few stores are as distinct as PacSun or d.e.m.o. None of Pacific Sunwear’s major competitors operates stores that have as well defined an image as PacSun or d.e.m.o.

Pacific Sunwear will manage the One Thousand Steps chain better than any other company possible could. If you first described the One Thousand Steps concept and then asked what company would be best suited to manage it, I would need only a fraction of a second to say Pacific Sunwear. No company is more knowledgeable about selling footwear to young customers.

The PacSun chain has done a tremendous job selling name brand footwear to teens. PacSun is directly responsible for the lasting success of several of the brands it carries. Although brand name footwear was already an important part of many skaters’ lives (and more importantly their spending habits), PacSun greatly magnified that importance. Without PacSun, the value of the major skate shoe brands would be significantly less than it is today. Very few retailers have had this kind of positive influence on the brands they carry.

It is impossible to evaluate the One Thousand Steps concept at this point. I will be watching the chain carefully to see how it distinguishes itself from its competition, how it increases customer stickiness, and how it selects the brands it carries. The more different One Thousand Steps is, the more successful it will be.

Pacific Sunwear plans to open 8-10 One Thousand Steps stores during the first half of 2006. Management believes the chain could grow to 600 - 800 stores. At an average size of 2,500 square feet, that would mean the chain could grow to between 1.5 million and 2 million square feet.

Upon announcing the new concept (last year), Pacific Sunwear CEO Seth Johnson made the following statement:

Footwear has been a highly successful part of our assortment in PacSun stores. One Thousand Steps will enable us to leverage our brand management skills in what we believe is an underserved market. This new concept gives us an exciting growth vehicle that adds a new and distinct customer base to our business. Combined with out existing PacSun and d.e.m.o. businesses, we will have the opportunity to achieve significant sales and profit growth in the future.

I am cautiously optimistic about One Thousand Steps. The concept is more promising than d.e.m.o. However, I will have to wait until I see an actual store before I can offer any assessment of the chain’s profit potential.

Estimates

Analysts are optimistic about Pacific Sunwear’s future earnings, but pessimistic about Pacific Sunwear’s shares. Wall Street is estimating 16-17% earnings growth over the next five years. That’s lower than the growth rate Pacific Sunwear achieved over the last ten years. However, it’s higher than the growth rate I would predict.

The average 5-year earnings estimate from analysts is in the 16-17% range; but, the average recommendation is a hold. These two opinions are mutually exclusive. They are utterly incompatible. You can not predict a 16-17% earnings growth rate for Pacific Sunwear without also predicting the company’s shares will outperform the S&P. Well, actually you can, because a great many analysts have done exactly that. But, you shouldn’t.

PSUN is trading at a P/E of about 14. The argument for a significant multiple contraction is very weak. What company is going to grow earnings at 16-17% a year and sport a P/E well below 12? The obvious answer would be a company weighed down by a tremendous debt burden. So, how much debt does Pacific Sunwear have? None.

The company’s total liabilities are about equal to current inventory levels. Current assets (ex other) are about $350 million; total liabilities are about $250 million. The company has about $125 million in cash and marketable securities. Pacific Sunwear can probably generate over $150 million in cash from operations each year.

It is unlikely the company can open new stores fast enough to keep free cash flow from reaching 50 - $75 million a year. This is a fast growing company that is generating cash much faster than it can spend it.

There is a good chance that, five years from now, there will be fewer shares outstanding than there are today. Therefore, whatever multiple contraction these analyst are expecting would have to bring Pacific Sunwear’s stock down to a P/E rarely seen by healthy, growing U.S. companies.

The company’s PEG ratio is well below 1, and its forward P/E is about 12. I don’t pay any attention to these numbers, but analysts seem to. So, why don’t they rate PSUN a buy? I don’t know and I don’t care. It probably has something to do with the industry.

Compared to analysts, I’m less optimistic about Pacific Sunwear’s earnings growth, but more optimistic about the company’s shares.

Profitability

Pacific Sunwear has consistently earned high returns on equity while employing very little debt. Over the past 10 years, the company has achieved returns on equity of about 17%. Returns in recent years have been higher than returns at the beginning of the ten year period. However, the company’s return on equity has been above average throughout the period, and the difference between the ROE of recent years and the ROE of the more distant past is not particularly significant. Basically, this has been a business with a 17% return on equity for some time.

Pacific Sunwear scores well on every profitability metric. The company has a high free cash flow margin - and an even higher owner’s earnings margin, because the company has invested much more in capital expenditures than required for maintenance alone.

Pacific Sunwear’s return on retained earnings has ranged from 25-50% and its pre-tax return on non-cash assets has ranged from 20-30%. Both of these numbers are quite healthy, especially considering the consistency with which they have been achieved.

Pacific Sunwear, like most of its rivals, leases its retail stores under long-term operating leases. The initial term of each lease is usually ten years. The use of operating leases makes it difficult to compare the profitability of companies like Pacific Sunwear with the profitability of companies that do not have any such long-term obligations.

Pacific Sunwear has about $700 million in minimum future rental commitments. The present value of these commitments should be estimated at well under $500 million for purposes of comparison. So, even if one were to compare Pacific Sunwear’s capital structure with that of non-retailers, PSUN would not appear to be unduly leveraged.

Conclusions

I don’t like owning retailers, and I don’t like valuing retailers. If I had to pick an expected 10-year annual return for the investor who buys shares of PSUN at tomorrow’s opening price, I would pick 12-13%. This rate of return should be enough to beat the market, but is short of the magical 15% rate of return that I believe will lead to a 3-5% real after-tax return for the buy and hold investor.

It is quite conceivable Pacific Sunwear will perform much better than I expect. If everything goes the way management hopes, and each of the three chains is expanded to the stated goals, the 10-year return could be closer to 15-17%. However, I believe such a high rate of return is unlikely. I’m sticking with 13%.

If I had to choose between being 100% invested in the S&P 500 or being 100% invested in PSUN, I would probably choose PSUN. If I had to choose between being 25-50% invested in S&P 500 or 25-50% invested in PSUN, I would definitely choose PSUN. Regardless, I expect shares of Pacific Sunwear will beat the market over the next ten years.

If you own more than a handful of stocks, PSUN would probably make a fine addition to your portfolio (if acquired at the $22.50 or so at which the stock last traded).

Geoff Gannon writes a daily value investing blog and produces a twice weekly (half hour) value investing podcast at Gannon on Investing.