Value Find: Eddie Bauer Holdings, Inc.

A new management team with a back-to-basics strategy, coupled with a beaten-down stock price, could make this small cap retail play an attractive medium-term turnaround opportunity.

The past 12 months have been quite a roller coaster ride for shareholders of outdoor casual sportswear and accessories retailer Eddie Bauer Holdings, Inc. (Nasdaq: EBHI). In February of this year, shareholders of the $209 million market capitalization company rejected a buyout offer at $9.25 a share from two private equity firms. By June, with Eddie Bauer shares touching the $14 level and a newly named CEO at the helm, rejecting this deal looked like a smart move.

However, after weaker-than-expected sales and rising expenses in recent months, Eddie Bauer shares have been punished, wiping away its summer gains and then some. As of this writing, the stock is now trading around the $6 level, near its lowest levels since being spun off in 2005 from its former parent, Spiegel Inc., as part of that company’s Chapter 11 bankruptcy reorganization.

Founded in Seattle, Wash., in 1920, Eddie Bauer has endured a rocky road in recent years, but still retains a solid brand name and retail footprint with 390 apparel and outlet stores throughout the United States and Canada, and a catalog sales and online operation. Revenue for fiscal 2006 topped $1 billion. Veteran retail manager Neil Fiske was named Eddie Bauer’s new CEO in June. Fiske may be unable to turn things around at ailing Eddie Bauer, but he isn’t new to the retail turnaround game. He previously led the successful turnaround of Bath & Body Works, a $2.5 billion in revenue division of Limited Brands, Inc. (NYSE: LTD). Earlier this month, Eddie Bauer also named several other veteran retail executives to fill out its new management team.

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