Investors don't hear much about Tandy Brands Accessories Inc. (NASDAQ: TBAC). Tandy designs and markets various types of clothing and fashion accessories under a variety of labels. Problem is Tandy is not marketing what vendors wish to purchase. Net sales for 1Q 2008 were down $18 million to $39.5 million, caused primarily on a lack of orders from Tandy's #1 customer. Any company that relies on one customer for the bulk of its business eventually winds up in trouble.
CEO J.S.B. Jenkins has spent the last 22 months trying to hollow out costs and shift away from low profit margin product lines. Tandy is transferring the remainder of its manufacturing capacity overseas to lower costs, and has lined up three new licensing agreements to begin in 2008. The company recently declared a dividend of $0.04 per share, its 18th straight quarterly dividend. But is a dividend payout really the best use of funds given that Tandy recently breached (not defaulted on) the terms of its $75 million unsecured credit line?
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