Northwest Arkansas Stocks Drop with Economy

A slowing economy means falling stock prices — in northwest Arkansas as well as on Wall Street.

Some local stocks were already selling at near record-low prices when the economy bogged down in mid-2000. The situation isn’t expected to improve substantially for at least a year.

“If they were not doing well in times of extreme economic growth, how well will they do if the economy is slowing down?” asked John Shelnutt, an economist at the University of Arkansas at Little Rock.

Although it seems that an inordinate number of area stocks are languishing, Wayne Lee, chairman of the finance department at the UA campus in Fayetteville, said stock prices for area companies were mirroring their particular industries and the economy as a whole.

“It has nothing to do with northwest Arkansas,” he said. “It has to do with the industry.”

Several sectors are down in

price lately, including trucking (because of high fuel costs) and retailing (affecting even Wal-Mart Stores Inc.).

“You can argue that the market got ahead of itself and expectations were just too high,” Lee said.

The health care and energy sectors are two of the few that have been unaffected by the recent downturn, Lee said.

Shelnutt said stocks on the Nasdaq exchange and the Standard & Poor’s Index might rebound somewhat before the end of the year, but slower economic growth is expected in 2001.

Shelnutt said the smaller northwest Arkansas stocks “may have trouble participating in that market rally.”

Examples

Down in price are:

• National Home Centers Inc. of Springdale, from $15 per share in 1994 to slightly more than $1.50 now.

• Brass Eagle Inc., the paintball company, from $25 per share last year to about $4.50.

• Loislaw.com Inc., the legal-research Internet company based in Van Buren, whose stock plummeted from $48 per share in December to about $2.50 per share. (While Loislaw.com is down 95 percent from its 52-week high, all of its major competitors are also down, although not by as much.)

• Advanced Environmental Recycling Technologies Inc. of Springdale, from almost $4 per share in January to a little more than $1 per share on the Nasdaq.

• JB Hunt Transport Services Inc. of Lowell, from $38 per share in 1998 to $13.25 per share.

• Cannon Express Inc. of Springdale, from $16 per share in 1994 to $1.25 per share.

• Beverly Enterprises, the Fort Smith nursing home company, from $15 in 1986 to $4.25 per share. The nursing home industry suffered as a whole from recent changes in the way Medicare reimbursements are made.

• Even Tyson Foods Inc., the poultry giant, whose stock is hovering around the $10 mark after hitting $25 per share last year.

• And Wal-Mart Stores Inc., the world’s largest retailer, which is selling for $47 per share, down from its high of about $70 per share as recently as January.

Here Today

Among the stocks that have seen price dives are three Fayetteville companies that have either left the area or may be doing so in the foreseeable future.

• Aarow Environmental Group Inc. has already left for Oklahoma City and renamed itself Aaro Broadband Wireless Communications Inc. The company provides wireless connectivity.

• Southwestern Energy Corp. appears to be on the verge of leaving after a crippling legal judgment of $109.3 million against the company in June. The suit prompted Southwestern to shift to being strictly an exploration and production company after existing for half a century as an integrated business.

• And Edgewater Technology Inc., formerly StaffMark Inc., is rapidly divesting itself of everything except its e-solutions division based in Boston.

Aaro’s stock was trading at just under $1 per share recently after being as high as $3.68 within the past three months. Southwestern Energy was trading at just over $8.50 per share recently after topping out at $18 a share in 1993. Edgewater Technology Inc. is down almost 90 percent, trading at just over $4.50 per share after hitting $44 per share in 1998.

Clete Brewer, chairman and CEO of Edgewater Technology, said StaffMark Inc. of Fayetteville was hit hard at a time when the staffing industry as a whole was suffering.

“The industry is just getting killed,” he said.

Edgewater Technology is down 60 percent from its 52-week high, but that’s not as bad as Modis Professional Services Inc. of Jacksonville, Fla., which is down 76 percent.

StaffMark Inc. officially changed its name to Edgewater Technology Inc. on July 3. The Fayetteville-based company’s stock ticker symbol also changed, from STAF to EDGW.

On Edge

Shelnutt said northwest Arkansas has two major problems when it comes to attracting and keeping businesses: lack of a low-wage labor force and lack of a high-tech labor force.

But Lee says that, despite the supposed low-end labor shortage, wages in the area haven’t been rising, Lee said.

“What that’s saying is that there must be supply,” he said.

With northwest Arkansas’ unemployment at record-low levels, immigrants from Mexico have been moving in to the area for the past decade, primarily to work in the poultry industry.

Although the UA provides the area with some high-tech employees, Shelnutt said, companies like Edgewater would fare much better in Boston, where there is a more educated labor force and a clustering of high-tech companies.

“That’s a very sweeping generalization,” Lee said. “We are certainly developing an [information technology] competence in the area. It’s not clear that Edgewater would do well because they’re located in Boston.”

In the digital age, Lee said, it’s not necessary for companies to be physically close to one another to communicate.

“Most trading is not done on Wall Street,” Lee said.

Brewer said Edgewater’s impending move to Boston had nothing to do with any deficiencies in northwest Arkansas.

“The reason we are moving the headquarters to Boston is that’s where the largest portion of Edgewater’s business is,” Brewer said. “And that’s where the president, chief technology officer, chief of operations and controller live.

“It has absolutely nothing to do with the resources in northwest Arkansas. This is a great city and a great area. It makes no sense to move those people from Boston. We already have a corporate headquarters in Boston that was running Edgewater. … Edgewater is doing business in northwest Arkansas and central Arkansas, but we don’t need overhead in both places.”

Brewer said Edgewater Technology Inc. has about 12 employees in Fayetteville. The company has about 120 employees in Boston. At its peak, StaffMark Inc. had more than 100 employees in Fayetteville.

After the move, Edgewater Technology Inc. will retain offices in Little Rock and Rogers, with about 30 IT consultants in Little Rock and about 10 in Rogers.

Although he will continue to live in northwest Arkansas, Brewer said, he hopes the former StaffMark Inc. will be fully relocated to Boston by the end of the first quarter of 2001.