‘Business as usual’ can be a very good thing, if your usual business is growing a solid revenue machine. Spicy Pickle (OTCBB: SPKL) has turned out to be a great example of how good companies don’t have to worry too much about their stock’s price as long as they continue to execute the right plan.
Take today’s news as an example. They announced they’ve signed leases for two new corporate owned restaurants (as opposed to franchisees). That shouldn’t come as a shock to anybody, since they announced that was part of the plan back on December 15th. Is the news complicated? No. Is it life-changing? No. Does it show progress? Yes, absolutely. That’s my point.
If you look back closely at the news and follow-up Spicy Pickle has made, what they’ve done is real simple…they told investors what they’re going to do (i.e. total transparency), then they go do it. Brilliant, eh? A lot of other companies could learn the same lesson.
I truly believe that’s why the stock has been able to hold its ground relative to early November’s levels. Just for perspective, since November 8th, SPKL is about even. Since the same date, the S&P 500 is down 7.0%.
The major support line appears to be around $1.10, and was basically established on November 8th. Since then we’ve seen some modest accumulation days, with very little distribution. That hasn’t necessarily helped yet, but I think it hints at the underlying opinion. Consider the environment and the comparative numbers above…if SPKL can hold its ground in a very tough market, I think it could do very well when things are better.
By the way, the corporate owned stores are desirable for investors because these stores tend to make more money for the company than franchised ones do.
The franchised units send 7% of their top line sales to Spicy Pickle every week, and the average franchise ends up paying royalties of about $50K per year. The remaining profits are retained by the franchisees. The corporate-owned stores, by comparison, basically get to keep all the profit. The trade-off is involvement – when you own your restaurant, you also have to operate it. When you franchise it, someone else operates it and pays you royalties.