It’s time to take a look at our annual list of investor friendly management teams.  While this particular list only covers the retailers that we follow, we would encourage you to provide us with other companies that you believe belong on the list and we’ll share your suggestions with our readers at a later date.

And the winners are…

5. Urban Outfitters (URBN – $35.50) – We’re putting URBN on the list for the wrong reasons.  URBN’s CFO has a reputation in the buy-side investor community for providing business updates to analysts on a consistent basis.  The word on the street is that the company’s CFO will provide anyone that calls an update on sales/margin trends by chain.  He also spends much time on the road at conferences and non-deal road shows consistently updating investors within earshot of the most recent business trends.  You can’t get more transparent than that!

Interestingly, the company’s CFO has now ‘retired’ and will be solely focused on IR during a 6-month transition until June 2010.  Did he ever do anything else?  Given the CFO’s seemingly sole focus on investor relations, we hear many buy-side investors wonder what else the company’s CFO did on a day-to-day basis. 

While the company provides a reasonable level of financial detail in its SEC filings and quarterly conference calls, we believe that the CFO’s “loose lips” are a Regulation FD investigation waiting to happen (see ODP 8-K filing on 12.04.2009).  Therefore, URBN makes the list due to the fact that investors never seem to be surprised.   

4. P.F. Chang’s Bistro (PFCB – $38.97) – Management provides investors with chain P&L’s (P.F. Chang’s / Pei Wei).  How else would investors discern that the underperforming Pei Wei operation needs to go away.

3. CKE Restaurants (CKR – $8.60) – Management provides possibly the most detailed information for its two chains that any investor could ever wish for.  Now, if they just gave forward EPS guidance…

2. Best Buy (BBY – $40.48) – Management provides fairly detailed GPM% and SG&A% data for its two divisions, U.S. and International.  This allows investors to scratch their heads re: the U.S. Division’s dismal merchandise margin performance in Q2/Q3.  In addition, management discusses sales trends in each of its key international countries.  Plenty of data to digest and analyze and management should be commended even if we believe that margin issues will persist and keep a check on the company’s stock price upside.             

1. Williams-Sonoma (WSM – $21.08) – The company’s CFO/COO is the absolute best in retail.  The combination of stores, catalog, and furniture make WSM potentially the toughest retail sector business to analyze.  Yet, the company provides a detailed overview of P&L line item changes and divisional data (stores versus catalog) that help investors better assess business trends by channel. 

The company goes a step further and provides the most detailed “line item” quarterly financial guidance imaginable.  This detail showcases management’s command of the business model and its numbers.         

We believe that many companies limit the level of financial/operation metric detail as it opens up the management team to a plethora of questions from the analyst community.  WSM management should be commended for being willing to take on these questions and for each quarter putting their necks on the line with their comprehensive level of financial guidance.    

Check back later in the week for our list of Top 5 Least Transparent Retail Sector Management Teams.

The Securities & Exchange Commission (SEC) has a dismal track record of enforcing the much ballyhooed Regulation FD since the rule’s inception in 2000.  There have only been a handful of cases pursued by the regulatory agency. 

On Friday December 4, 2009, Office Depot (ODP – $6.94) tried to ‘bury’ an 8-K filing informing investors that CEO Steve Odland and two former employees had “received notice that staff at the U.S. Securities and Exchange Commission has recommended that a civil enforcement action be brought against them for possible violations of Regulation Fair Disclosure, which governs public companies’ disclosure of material information.”   

Last year, ODP disclosed that the SEC was investigating allegations that ODP made a “series of phone calls to analysts in June 2007, warning them that weak economic conditions were hurting its sales.” 

Big picture, the reality is that this practice of informing sell-side equity research analysts is all too common.  Management teams would prefer to “talk down” analysts instead of disappointing the street with an earnings ‘miss’ versus the consensus estimate.  How many times have sell-side analysts downgraded a stock due to their supposed “channel checks?”  Many times, these “channel checks” are a by-product of conversations with company management and not actually legitimate research performed by the analyst. 

Many companies have rightly adjusted their information disclosure and are in full compliance with Regulation FD.  That said, we believe that a far larger percentage of companies still adhere to the “wink and nod” investor relations practice that was unfortunately the norm prior to 2000.  Good job to the SEC for FINALLY shining the spotlight on a practice that needs to end.

http://www.reuters.com/article/idCNN0417978920091205?rpc=44