The timing of the move is curious. Wal-Mart seems to be the only retailer showing signs of strength during the economic downturn as cash-strapped middle-class shoppers flock to the chain, lured by its low prices. I count myself among this group. Moreover, shares of the world's largest retailer are up 6.6% this year, making them the only component in the Dow Jones Industrial Average to post a gain.
Of course, Wal-Mart is spinning this like a dreidel at Hanukkah. Rob Walton, the chairman of the board of directors, said in a press release that "Lee Scott has made an extraordinary contribution to Wal-Mart during his almost thirty years of service as an associate, and as our president and CEO for the last nine year [...] Lee has earned the respect and affection of our associates around the world, and of the Walton family."
Alright Mr. Walton, if this is true, why would you want to replace him? Perhaps Scott and the Waltons had some sort of dispute. Maybe it was over strategy. Maybe it was over something else. I found it odd that the announcement had no verbiage about Scott wanting "to spend more time with his family" or wishing him luck to "pursue other interests." Scott, though, maybe has decided it was time to call it a career.
Wal-Mart deserves credit for not rushing Scott, 59, out the door. Effective February 1, he will become chairman of the executive committee. The 58-year-old Duke won kudos from investors for guiding Wal-Mart's international business. Eduardo Castro-Wright, the head of Wal-Mart's U.S. operations, becomes vice chairman.
The new Wal-Mart will continue to be as big of a juggernaut as it has been in the past.
Sex, Lies and Subprime Mortgages It may seem like ancient history now, but not long ago the mortgage industry was turning ordinary people into millionaires. One of them was Sharmen Lane, a high school dropout who, like many other young women during the boom, found her way into an obscure banking job with the clunky title "mortgage wholesaler." Her experience-and the experiences of other wholesalers like her-offers a glimpse into the recklessness and indulgence that drove the industry to ruin. The sexual favors, whistleblower intimidation, and routine fraud behind the fiasco that has triggered the global financial crisis. http://www.businessweek.com/magazine/content/08_47/b4109070638235.htm?campaign_id=twxa
Barnes & Noble (NYSE: BKS), a bookseller that competes with Borders Group (NYSE: BGP), Amazon (NASDAQ: AMZN), and retailers that stock books such as Wal-Mart (NYSE: WMT), did not do well during the third quarter. Total sales decreased over 4%. A GAAP loss of $0.34 per share was reported versus a GAAP profit of $0.07 per share in the year-ago period. On an adjusted basis, the loss of $0.21 per share missed the call by $0.05, according to this source.
Okay, is it me, or do these numbers basically broadcast loud and clear that Barnes & Noble is not worth one penny of your investment capital? Besides the above, same-store sales took a big dive of 7.4%. That should be the last nail in the coffin of the current Barnes & Noble story, one that reads like a Stephen King novel. Actually, though, it isn't. Another nail to add would be the fact that guidance has been adjusted lower by management. Now, according to CEO Steve Riggio, gross margins are doing okay. I'll skip that chapter, though, as there isn't much substance to it. Who cares about the gross margin at this point. With traffic down and probably due to get worse, a positive tale of the gross margin isn't going to make me want to buy Barnes & Noble as a value play.
While you probably won't see many more doors closing before the end of the year, expect to see weak retailers facing liquidations if the holiday season is as bad as many predict it will be. We've already seen 22 retailers file for bankruptcy including Steve & Barry's, Circuit City and Linens 'n Things. Some may survive bankruptcy reorganization and live to see another day. Other retailers may not be able to find the funds to refinance and will be forced to liquidate and close.
Locally, near me in Florida, only one Circuit City has closed and you don't see much evidence of the bankruptcy. Shelves are not stocked as well and advertising is down, but you'd only know that if you watch the stores closely.
The top retailers, such as Wal-Mart (NYSE: WMT) and Best Buy (NYSE: BBY) will survive easily, but many second and third tier retailers will be struggling to make it. Standard & Poors downgraded the credit rating for 53 retailers already this year, which is higher than the total number of downgrades for all of 2007, and it expects to downgrade more before year end. Deloitte Research Chief Economist Carl Steidtmann told Business Week, "It's been a long time since we've seen an environment as challenging as this."
It was just a matter of time. It looks like the Apple, Inc. (NASDAQ: AAPL) iPhone 3G will be coming to Wal-Mart sometime before the end of the year, but probably after Christmas. According to the Boy Genius Report, which claims its sources are reliable and to have come across some internal Wal-Mart correspondence, the iPhone 3G will be sold in 2,500 Wal-Mart locations in about a month from now.
Remember that the iPhone 3G must be activated (unlike the original iPhone), so only Wal-Mart locations that can use a specific ordering and activation system can carry the iPhone 3G. Some Sam's Club locations will also carry the iPhone 3G, but they also must use the Wal-Mart ordering and activation system in-house (several Sam's locations use a different wireless activation system). All in all, this will make the iPhone available to just about every American (well, the ones with good credit at least) as more U.S. shoppers have exposure to Wal-Mart than just about any other store.
The question is whether Apple is forsaking the iPhone cool brand allure by offering it at the largest discounter in the world. At this time, no. The iPhone 3G has been out in the world long enough for the iPhone to make its name. Offering it at Wal-Mart now won't impact its reputation nor affect Apple's cred.
Since Apple pretty much dictates pricing to its retail partners, expect the iPhone 3G to sell for a dollar or two less than the standard $199 and $299 pricing levels seen at all other retailers. Say, something like $197.48 and $297.48, as Wal-Mart is into non-standard retail pricing schemes to try and create the illusion of low prices against the competition. The presumed launch date: December 28th. Get ready.
So it appears Best Buy is getting hit with a double whammy, according to a November ChangeWave Alliance Research Network survey of 2,763 U.S. consumers.
The massive slowdown in consumer electronics spending this holiday season -- which the survey shows to be the weakest ever -- is a far cry from the surge that normally occurs at this time of year.
Only 19% of consumers said they'll spend more on electronics during the next 90 days compared with 43% who said less -- a net 40 points worse than a year ago.
We all know that this Christmas is going to be particularly tough on retailers. Wal-Mart (NYSE: WMT), Target (NYSE: TGT), Sears (NASDAQ: SHLD), and Best Buy (NYSE: BBY), as well as hipper competitors Abercrombie & Fitch (NYSE: ANF) and Gap (NYSE: GPS), will be fighting it out at the mall Mad-Max style the next several weeks.
It's not going to be pretty. With comps and cash flows on the line, these chains will be looking to extract as much discretionary money from consumer wallets as is heavenly possible. But there's a troubling sign with respect to a popular gift option this year.
Gift cards have been soaring in popularity over the years. Not only do they make great presents, but retailers love them because they represent a little insurance policy: if the Christmas quarter isn't as strong as a retailer would like, then redemption of gift cards will theoretically help the bottom line in the next quarter. The card purchases do not get recorded as a sale until they are redeemed. So it's like a squirrel putting food away for the long, cold winter.
Unfortunately, we have some bad news on this front: gift-card sales are expected to be down 6% this season. That's not what retail investors want to hear. It's just another reason for traders to short this sector.
There is an old phrase, "Doing well by doing good." Show the public what a nice guy you are and people will be more likely to do business with you.
According toThe New York Times, "Responding to the economic downturn, Wal-Mart Stores Inc. plans to give more than 90 million pounds of fresh food annually to the nation's largest nonprofit organization addressing hunger, Feeding America." That seems like a lot of food, probably because it is.
Wal-Mart's (NYSE:WMT) new program will certainly help the poor but it may not bring the retailer more sales. There may be some good PR in it, but there's no guarantee that the initiative will help bring in customers at all. In that way, it is truly charitable.
A number of big companies give money to museums and the arts. Many encourage their employees to contribute to the United Way or help out on community projects. But it would be hard to find something which has such a direct benefit as feeding people who cannot feed themselves.
Wal-Mart has take its share of beatings in the press. It ought to get a lot of credit here.
Welcome to the 85th installment of The Wal-Mart Weekly, a column dedicated to bringing you insight, wit, facts, results, opinions, and just a bit of everything else when it comes to a very hot topic these days: Wal-Mart.
Wal-Mart Stores Inc. (NYSE: WMT) has seen its share of ups and down in recent years. It has tried to change its strategy, brought more stores into its fold, had a hand at recruiting more customers from higher-margin spending segments and has eventually returned to its strength: supplying discounts on everything it sells to as many consumers as possible.
Where is Wal-Mart headed? Right now, in a straight line. I firmly believe that the world's largest retailer is in the best possible position to ride out the current global economic crisis better than any other company in any industry. Why? People won't stop eating and clothing themselves and their kids, while buying birthday cards and placemats. And, they want it as cheap as possible. Enter Wal-Mart.
Target (NYSE: TGT), arch competitor of Wal-Mart (NYSE: WMT), Sears Holdings (NASDAQ: SHLD), and Best Buy (NYSE: BBY), reported earnings for the third quarter on Monday. According to my earnings preview, the call was for $0.49 per share. On that basis, Target met the expectations of analysts. But I've read some other headlines that said that estimates were beat. Apparently some of us are working off different data. No matter; it was a dismal quarter no matter how you slice it.
According to the press release, net sales advanced a mere 1.7%. Worse, same-store sales dropped over 3%. That's the important figure to consider when talking about retail. Target did okay in terms of cash from operations, but that doesn't mean that things will be great going forward. Not at all. In fact, although management produced a gain in operational cash flow, all of it -- and more -- was taken up by capital expenditures. This issue of cash is actually the big angle of the story for me. Management states in the release that it has stopped share-buyback activity and that it intends to be conservative concerning capital spending. It literally mentioned that its business is not necessarily attractive to invest in at the moment.
If that's the case, should you buy the stock now? I'd say you better think long and hard before buying Target at its current price level. As I write this, the stock is down about 2.5%. It isn't at the 52-week low, but I don't see how it won't go back there, and beyond, before the year is out. Is Target most likely a good long-term play? I'd say the company is. But it's difficult to look at this report and say that now is the time to buy, even for long-term thinkers. Sales are down, the company's credit-card business isn't scoring any points, and the outlook is not favorable. I guess I'm in a bearish mood when it comes to the bullseye retailer...
Disclosure: I don't own any company mentioned; positions can change at any time.
It appears that there is not much chance for makers of TVs, PCs, and video game systems to have a good holiday season. The consumer's pocket book is empty. Consumer electronics are relatively expensive and they are not items that anyone has to have while the recession roles on.
Enter Wal-Mart (NYSE: WMT), perhaps the only retailer large enough to change the course of fourth quarter sales for the electronics industry. The question is whether a company, even one as large as Wal-Mart. can make a difference with buyers who may spend as little as possible for the holiday?
According to CNN Money, "Wal-Mart is highlighting flat screen TVs, Blu-ray players, Xbox 360 consoles, and home computers in its much-anticipated Black Friday deals this year."
The news would seem to be positive for the consumer electronics industry, but a look at the numbers shows that it may not be be a terribly big deal. Of Wal-Mart's $97 billion in third quarter revenue, $61 billion came from its U.S. stores. If TVs, PCs, and video games are 1% of the big retailer's sales, that is "only" $610 million. Dell (NASDAQ: DELL), one of dozens of companies selling products in Wal-Mart, has quarterly revenue of over $16 billion. That means that the Wal-Mart sales are spread over so many large companies that even its heft may make very little difference.
No matter what Wal-Mart does, it will hardly make a dent in the troubled consumer electronics industry.
Following the week we have just endured, many would find it hard to return to the stock market any time soon, despite so many pundits calling the market bottom on Thursday. Bad news just keeps amassing: the Euro-zone is officially in recession, unemployment in the U.S. and globally is on the rise, the housing market is far from any sustainable recovery, the auto sector is a mess and so on.
But it is always in these hard times, when things are cheap, that bargains can be found. While cheap can be meaningless during these times as Jim Cramer said this week and Joe Lazzaro seconded, perhaps some value could be found after all. What, then, did BloggingStocks contributors find worthwhile this week?
First, let me start, not by gloating, but by pointing out that on more than one occasion, more than one contributor has suggested to steer clear of Circuit City Stores Inc. (NYSE: CC). The electronics retailer has filed for bankruptcy Monday and the NYSE has suspended the company's common stock immediately. The stock is now traded over the market under CCTYQ.
Sirius XM Radio, Inc (NASDAQ: SIRI) reported a quarter that caused Steven Mallas to pause and think. The only way he sees Sirius is as a very -- very -- speculative and risky play. Since the stock has been beaten so much and is so cheap, if it doesn't disappear by the time the economy turns, it could be interesting. But only if one has the cash to burn. Jamie Dlugosch adds a reminder about SIRI's debt, hoping it would earn a reprieve from its debt holders as it tries to operate as one company. "Just imagine what this company could do in a normal economy. It would be truly tremendous."
Abercrombie & Fitch Co. (NYSE: ANF), the hip clothing store that competes with The Gap, Inc. (NYSE: GPS) and J.C. Penney Company, Inc. (NYSE: JCP), is no different than any other retailer. Christmas is going to hurt... hurt bad. Make no mistake. And as far as earnings reports goes, the pattern is in: report a decline, then issue some nasty guidance.
Abercrombie reported Q3 numbers today, and according to the press release, net sales decreased 8%, and earnings per diluted share declined 44% to $0.72. As Melly Alazraki reported this morning, that $0.72 beat analyst estimates. But the market could care less. As Melly pointed out, the full-year outlook was cut. The stock sold off upon the news. In fact, as I write this, the stock is down nearly 15%. By the way, if by the time this is published the market is up and Abercrombie's shares are trading in the green (big if, granted), don't even think it's a buy. Put that out of your mind. Did you see the same-store sales? They were down 14% for the quarter. That figure is grabbing the attention of investors, I'm sure. When you see a downturn like that, well, you know things aren't going to turn around quickly.
Abercrombie's woes will be with it for a while. Management will find it difficult to strike the right balance between staffing the stores properly and increasing marketing activities. All retailers will be in the same boat. The stock hit a new 52-week low today of $18.83. My guess is that the stock will be as volatile as the market, and that it will trend in a downward direction over the next couple months. Obviously I don't think it's a buy. Broken stock and broken fundamentals aren't a great combo. Abercrombie continues to plan for new store openings in fiscal 2008; perhaps those investments will pay off down the line. For now, the retail sector is doing horribly, competition in the sector is becoming cutthroat as consumer confidence loses value, and I continue to look at only two names -- Wal-Mart (NYSE: WMT) and Target (NYSE: TGT) -- as possible long-term values. Yep, Abercrombie & Fitch isn't so sexy anymore.
Disclosure: I don't own any company mentioned; positions can change at any time.
Maybe the government should start subsidizing the anti-depressant industry. That's the only way investors are going to be able to cope with the drumbeat of depressing economic news such as consumer confidence hitting near a 28-year low.
According to Bloomberg News, The Reuters/University of Michigan preliminary index of consumer sentiment unexpectedly rose to 57.9, from 57.6 in October. In 2007, the index averaged 85.6. I was able to tell things were bad this summer by the huge number of garage sales that I saw in my area. A few people placed their living room furniture for sale on their front lawns. It was among the saddest things I have ever seen.
Consumers have good reason to feel uneasy. Companies such as Sun Microsystems Inc. (NASDAQ: JAVA) are laying off thousands of workers. Treasury Secretary Henry Paulson abruptly changed his mind yesterday about how to prop-up the ailing banking sector and still wants to keep details of the deals that have been cut secret. My colleague Peter Cohan persuasively argued that President-elect Barack Obama should scrap the Paulson plan when he takes office in January.
In a surprise move, Wal-Mart Stores Inc. (NYSE: WMT) replaced H. Lee Scott as chief executive with Mike Duke, the president of Wal-Mart International.
While you probably won't see many more doors closing before the end of the year, expect to see weak retailers facing liquidations if the holiday season is as bad as many predict it will be. We've already seen 
It was just a matter of time. It looks like the 
Electronics giant 
We all know that this Christmas is going to be particularly tough on retailers. 
There is an old phrase, "Doing well by doing good." Show the public what a nice guy you are and people will be more likely to do business with you. 
Welcome to the 85th installment of The Wal-Mart Weekly, a column dedicated to bringing you insight, wit, facts, results, opinions, and just a bit of everything else when it comes to a very hot topic these days: Wal-Mart.
Following the week we have just endured, many would find it hard to return to the stock market any time soon, despite so many pundits calling the market bottom on Thursday. Bad news just keeps amassing: the Euro-zone is officially in recession, unemployment in the U.S. and globally is on the rise, the housing market is far from any sustainable recovery, the auto sector is a mess and so on. 
Maybe the government should start subsidizing the anti-depressant industry. That's the only way investors are going to be able to cope with the drumbeat of depressing economic news such as consumer confidence hitting near a 28-year low.
General Motors (GM), Ford (F) going to $1
Average U.S. gasoline price falls to $1.99 and is likely to drop more
The RIM BlackBerry Storm launches on Verizon Wireless to mediocre fanfare
