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Mature Technology and Deep Discounting Spur HDTV Sales - Not Pent Up Demand

December 5, 2008

Analysis of:Consumer Electronics Sales Surge On Black Friday | www.twice.com

Tech-related consumer products follow a relatively predictable curve, driven primarily by the rate and extent of new product innovation.  HDTV's have not seen significant new product innovation over the last year, and the technology is mature and proven.  Widespread distribution and the need for traffic-pulling promotions have impacted volume and gross margin.

November Results indicate that continued price promotion may be the only option left

December 5, 2008

Analysis of:Retailers see sales drop in dreary November | www.usatoday.com

The only bright spot in the retail sales announcement was Walmart....the beneficiary of a year-old "value" campaign positioned perfectly for the recession.  Buried within the onslaught of bad news was the performance of retailers who had NOT accelerated promotional pricing and broadened discounting throughout the merchandise mix.  These retailers continued to suffer greater declines than their segment competitors.  While gross margin dollars remain the real test, the difference in volume seems to significant enough to offset the margin gain.  Clearly, holding price and maintaining a normal promotinal posture may be the recipe for disaster this Holiday season.

Realistic Assessment is not Pessimism

December 3, 2008

Analysis of:Retailers Get a Brief Lift on Black Friday as Shoppers Look for Blockbuster Sales | www.nytimes.com

The preliminary reports from the post-Thanksgiving weekend do nothing to alleviate the legitimate concerns analysts have about consumer spending. An accurate analysis of the results will not occur until Retailers report November sales later this week.  Pending that moment, even the preliminary numbers carry hints of confirmation that total consumer spend is in fact down substantially.  Contrary to some observations, the depth and breadth of promotional markdowns used to stimulate the Black Friday spend spike were above "plan" and well beyond those used last year. This year, rather than a few loss leaders (often without inventory to support them), stores were discounting legitimate key items, with significant stock available.  The GM impact will be severe, and yes, beyond expectations.

Luxury Retailers may be a solid long term play

November 19, 2008

Analysis of:What’s Not Selling at Saks | blogs.wsj.com

Economic data indicates that credit issues, mortgage problems, and job security are issues common to all demographic segments.  However, they are absolutely LESS of a problem to the luxury segment than to any other.  Recent analysis of spending during the last recession showed that luxury retailers had an initial downturn, but recovered sooner than moderate retailers.  Saks, Neimans and others are potentially better positioned to rebound with value than any other segment of retail.

Spreading out spending will not equal net increases!

October 21, 2008

Analysis of:In early holiday push, Wal-Mart cutting toy prices | www.reuters.com

WM's early price cut and accelerated set up of Christmas shops has little if any potential to significantly impact overall season volume.  Shopper psyche is unlikely to be influenced by the early availability of merchandise. Probable impact will be to trigger competitive reaction, followed by deeper discounts.  Net, overall retail margins can only suffer from this type of activity this early in the season.

BRIC markets are very dissimilar opportunities

April 29, 2008

Analysis of:Li & Fung boss predicts BRIC retail expansion | www.just-style.com

Governmental restrictions vary from market to market, existing shopping patterns are extremely differentiated, and cultural barriers are not the same within the BRIC market.   Successful penetration of each of these will require different approaches, processes, and skill sets.  They are not similar markets....only linked by their internal economic development "status".  Successful operators will seek market-specific expertise, and view each of these as independent opportunities, with relatively little leverage between them.

Weakness in branded apparel creates opportunity for JCP

April 17, 2008

Analysis of:J.C. Penney Curbs Expansion, Pushes Private Label | online.wsj.com

The relative weakness of branded apparel creates the opportunity for well executed private label programs to capture share and generate profit.  JCP is doing exactly the right thing at the right time.  Strategic growth of private label is the important distinction, with focus on which categories are being targeted and how the private brands are implemented.  Key considerations are the strength of national external brands in each area and the relative risk associated with trend or fashion interpretation.

The "myth" of Low Hanging Fruit

April 16, 2008

Analysis of:Home Retailer Expected to File For Bankruptcy | online.wsj.com

Private equity groups have been seduced by the myth of low hanging fruit.  From Montgomery Ward to Toys R Us to Linens N Things, the common denominator is an unfounded belief that acquisition costs can be paid for through immediate profit improvements.  Flawed business models are the common denominator for most of these companies.  And flawed business models do not generate quick and reliable earnings improvements.   Too many "experts" peddle the same mantra for quick turnaround, without having the hands-on experience to truly understand how difficult achieving those results turns out to be.  Private equity needs to do a much better job of due diligence in analyzing retail investments.

Private and Exclusive Brands: Yes, if Managed Well

April 14, 2008

Analysis of:Exclusive Lines May Prove Risky In Cool Economy | online.wsj.com

Private brands carry between 150 basis points and 250 basis points higher initial markup than the average external brand offered in department stores.  The economics influencing cost of goods are identical for a retailer as they are for an external brand.  The only major element of significant risk is in fashion interpretation.  Exclusive brands tend to represent specific and identifiable lifestyle interpretations.  These have much greater risk than traditionally managed private brands.

Improbale Value Proposition

April 10, 2008

Analysis of:Retailers Compete for Share of Consumers' Rebate Checks | www.retailwire.com

Regardless of which school of economics you believe in, the truth behind the retail value of the tax rebate program won't vary.  Stimulus to spending?  Maybe.  Important enough to make a difference to the bottom line of publicly traded retail stocks?  No.  Opportunity for short-term earnings increase?  Improbable.

Share Price Reversal: Yes. Share Price Renaissance: No

April 10, 2008

Analysis of:Starbucks New Strategy | topics.nytimes.com

The QSR approach to building volume has failed.  Location saturation may not be complete, but diminishing returns on new locations should be anticipated.  Brand equity has been lost, and competitive positioning blurred.  The efforts taken seem to address all of these negatives, yet fail to answer the question of where the growth will come from to stimulate stock prices back to historic levels.

Private Brands, Reality Checks, and Patience

April 7, 2008

Analysis of:J.C. Penney Guts First-Quarter Earnings Forecast | community.investopedia.com

Immediate American Living management choices, such as short term markdowns, retrenchment and possible editing of the assortment may have some impact on overall JCP earnings.  However, in the long run, the brand still represents exactly the sort of aspirational opportunity appropriate for a tough economic climate.

Strategic Sourcing and Price Implications

April 3, 2008

Analysis of:WWD Article: Vendors Take Control Amid Uncertainty | www.wwd.com

Private label will become increasingly important, in part due to higher margins and in part due to sourcing control.  Well developed strategic sourcing capabilities will already have begun to shift within China and away from China if the organization has that expertise.  It can't be created overnight.  Pricing will edge upward, dependent on the willingness of existing players to absorb lower margins, or not to.  Retailers will absorb some margin erosion, and price and promotion maximization software will become even more relevant.

The True purpose of the Sears Re-organization

April 3, 2008

Analysis of:Sears Holding names tool, lawn president | www.forbes.com

If something doesn't look like a duck, act like a duck or quack like one, it's probably not a duck.  So this probably isn't a reorganization designed to maximize the long term value of the "retail" entities now known as Sears and Kmart.  The implication is that SHLD is not a retail play any longer...and that it is probably a liquidation play.

Understanding the impact of eCommerce results on MultiChannel Retail metrics

October 19, 2007

Analysis of:Outlook For Online Shopping, A Mixed Bag | www.informationweek.com

Effective forecasting for the Holiday period must take eCommerce into consideration.  The impact of eCommerce for multichannel retailers will vary dependent on the breadth of those channels, and the relative size of the eCommerce volume.

Stabilize the core, refocus Sam's and continue new format creativity

October 10, 2007

Analysis of:Wal-Mart's New Growth Opportunities | www.businessweek.com

The probability of a radical change in WM's key metrics of US comp store growth and total revenue growth are relatively low.  Sheer size and scope limit the potential of any single effort in substantially influencing these metrics.  Of critical concern to long term investors should be WM's ability to hold it's core, fine tune it's existing businesses, and find alternative avenues to generate growth.

Walmart "bashing" is fashionable, but often lacks any compelling facts

October 9, 2007

Analysis of:Wal-Mart Era Wanes Amid Big Shifts in Retail | online.wsj.com

The struggles of WM to meet unrealistic Wall Street expectations are well documented.  An unfortunately well documented series of ineffective management actions provides too much ammunition for the legion of WM haters.  The critical question in assessing the health of the WM organization is what they "should" be doing that they are not.  Is slow growth the early onset of retail concept senility?  Or is it simply unrealistic expectations built on decades of beyond anticipated success?

Will all of this enable Home Depot to become more relevant to a shrinking market?

October 2, 2007

Analysis of:Consumer spending slows, retailers take hit | www.nydailynews.com

The guidance provided by Home Depot vaguely articulates  a strategy designed to produce sustainable (low) growth in revenue and strong (>10%) growth in earnings.  Investing in IT and store remodeling has never been enough, in and of itself, to drive savings, margin improvement or top line growth.  The changes in business processes are the key drivers, and these we have no insight into at the moment.  Without changes in business decision making, the investments noted place significant short term pressure on earnings and management.

Making an impact on "conversion"?

September 26, 2007

Analysis of:Slowdown worries are coming into view in the hot flat-panel TV market. | www.thestreet.com

Providing customers the ability to buy online and pickup instore is a critical capability for Shopping 2.0.  However, before we extrapolate these initial results, there are critical metrics which have yet to be reported.  Conversion rate, same store sales, and overall online volume are the missing numbers to this picture.  The program is necessary and all multi-channel retailers should be working toward having this capability.   Is it significant enough to move the needle?  The jury's apparently still out.

Mattel's Chinese Apology: The appropriate and the troubling

September 24, 2007

Analysis of:Learning from Mattel's Chinese Apology | www.usnews.com

It is appropriate for Mattel to accept responsibility for a design flaw, and to clean up the matter with the public, itself, and all shareholders.  This is consistent with the standards of servant leadership I know Bob Eckerdt holds.  However, that isn't the real issue here. If, as has been suggested, the apology derives from the realpolitik associated with China's power over Mattel, then shareholders have a reason for concern.  Concentrated sourcing in high risk areas exposes the company to unacceptable levels of risk which cannot be truly mitigated against.

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