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Sears, The Retailer That Once Was

November 20, 2006

Analysis of:At Sears, Investing - Not Retail - Drive Profit | online.wsj.com

1. Sears retailing operations continue to flounder.

2. Profits are generated through various financial engineering schemes.

3. What will the future Sears looks like?

An audit without a deadline

November 16, 2006

Analysis of:Accounting Watchdog Falls Behind | wsj.com

1. The PCAOB is an entity that few people know much about

2. Although they impose strong standards on the accounting firms, their own processes seem to be needing improvement

3. Accounting firms don't have the luxury of finishing audits without a deadline. Why should the PCAOB not have one?

Less Inventory Equals Less Sales, butr more profit

November 16, 2006

Analysis of:Dillard's Posts Surprise Profit | www.thestreet.com

1. Dillard's faces a tough competitive climate

2. It finally has abandoned its cluttered store concept and streamlined inventories

3. The net result is fewer sales, but increased profitability

Sick Accounting profession wants liability relief like Doctors

November 3, 2006

Analysis of:Booming Audit Firms Seek Shield From Suits | online.wsj.com

1. Other than payroll costs, legal costs are the largest expense in an accounting firm.

2. Doctors got medical malpractice relief last year and now the accountants want the same treatment.

3. But are the accountants willing to lower their billing rates, if they have less legal exposure?

DA! You must be dumb, blind and stupid

October 31, 2006

Analysis of:Cheney Echoes Recent Concerns on Sarbanes-Oxley | online.wsj.com

1. Sarbanes Oxley has cost US businesses billions of dollar, making the cost of doing business in the US higher than other capital markets around the world.

2. The biggest benefactor of Sarbanes Oxley is the big 4 accounting firms who also got a windfall from the demise of Arthur Andersen. The combination of expanded scope and smaller pie has increased their profitability to record levels.

Rules vs. Principles

October 24, 2006

Analysis of:Danger of a shift from principles to rules highlighted | www.ft.com

1. Auditors are substituting their judgment for adhering to rules

2. Rule based compliance helps auditors to minimize tier litigation exposure

3. Accounting is now producing meaningless results by following arbitrary rules

It does not smell right

October 13, 2006

Analysis of:Bed Bath & Beyond Admits Extensive Options Backdating | www.wsj.com

Bed Bath and Beyond has admitted to back dating options from 1992 -2006 - 14 years! It admits that its top 3 executives were not only aware of this, but endorsed it. This included the co chairman, Warren Eisenberg, and it's CEO Steve Temares.

The Company then indicated that it did not need to restate, but instead corrected this with a charge to equity for $66 million and a charge in the current year for $8 million. Evidently they thought this was not material enough to restate. They also said they are investigating the tax implications of back dating and that the SEC has initiated an informal investigation.

It appears the company has been very aggressive in correcting and disclosing this event. How can the SEC investigate this event and not make them restate? Further, it sounds like there could be some criminal investigation facing this company as well as further adjustments for the tax impact of backdating.

It will be interesting to see how their Auditors respond to this disclosure. Do they feel comfortable enough with management's conclusions and the completeness of their investigation?

From the surface this appears to stink. Don't be surprised if you hear more about these transactions, including a more detailed investigation by the SEC and further adjustments to their financial statements.

So Why is it so Costly?

October 9, 2006

Analysis of:Firms Required to Restate Earnings Face Drain of Time, Money | baltimore.bizjournals.com

The number of restatements have doubled in 2005.

The time and expense in dealing with these restatements can be significant.

So why does it take so much time, expense and distraction?

The rumors of Jones demise may be greatly exagerrated

August 24, 2006

Analysis of:Aborted Sale leaves Jones in a tough spot / Buy my company please; why some companies go unsold in merger boom | www.wsj.com

1. One of the largest US apparel companies put themselves up for sale - why?

2. Private equity firms looked but did not buy - why?

3. Business as usual may not be all that bad

MAY COMPANY ACQUISITION

August 11, 2006

Analysis of:Federated Department Stores, Inc: Form 10-K (2005) | www.sec.gov

MAY COMPANY ACQUISITION

In September 2005 the two largest department stores in the US merged, when Federated acquired May Company. As the retail industry continues to consolidate, this acquisition made a lot of sense, with May Company being strong in expense control and well disciplined and Federated being the better merchant.

In the short term this will produce some pressure on earnings due to Federated incurring over a $1 billion in integration costs as well as closing a number of locations and changing the name plates on the May stores to Macy's. However on a long term basis this should be very positive on earnings.

No ifs and or buts - Round 2

July 28, 2006

Analysis of:Cox: Backdating Charges Imminent | www.cfo.com

1. Backdating options would require you to record expense if the price was less than the price at the grant date.

Doomsday for Retailers

July 25, 2006

Analysis of:FACTBOX-Retailers seen taking biggest hit from lease accounting | today.reuters.com

1. The FASB is considering changing the criteria for capitalizing leases.

This could significantly impact the retailing industry

Who is in charge of the Accountants?

July 25, 2006

Analysis of:SEC: More Questions than Answers on 404 | www.cfo.com

1. More regulations are coming out on how internal controls should be documented, tested and audited.