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3 O'Clock High: Stuffin'

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"I don't care where you grew up, missy... around here it's 'Freedom Bacon'!"

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With so many Minyans still having to get over rivers and through woods in order to get to grandma's house tonight (in some cases so you can get there before certain Uncle Paulie's who are apt to have sucked down all the Guinness and the good wine before Thanksgiving dinner, unless you get there to "guard" the supply), let's jump to the mail-bag, fictional-celebrity edition!

Minyan C. Montgomery "Mr." Burns writes:

For Jeff Macke: I cannot go to a mall. Trying to navigate around the soccer moms who are blocking traffic because they cannot maneuver their full-size Suburbans while talking on cell phones makes my blood pressure boil over.


But one of my employees [ed. note: "Smithers?"] went last night and said it was noticeably sparse and get this, he said there were a lot of barkers outside stores trying to lure people inside. Like girls standing out front telling shoppers, "Come on in, we have great deals on sweaters".

Wonder if Black Friday turns red this year?

C.M.B,

By traditional post-Thanksgiving shopping mall parking lot common law, come this Friday, it's acceptable to ram your automobile into any car you deem to be obstructing traffic. Gender and cell-phones are non-factors; as long as they don't have a "Baby on Board" sign you can rev the death mobile to ramming speed and start "making things right" out there at the Mega-Sprawl Mall with impunity.

Local customs vary so check with your constabulary.

To your question, I think black Friday will be "fine".

Fleshing that out a bit, I think fine looks like maybe 5% better than last year. Maybe a little more.

I think the companies who are hot going into the season will stay hot. That means Abercrombie and Fitch (ANF) is going to put up huge numbers and the Gap (GPS) will remain dead, pretty much through the holidays and until further notice.

I don't think the season will be particularly surprising in the larger picture. Expectations for the holidays have been working this way since August (when the retailers rolled over) but, bigger picture, "ok on the top line but decelerating for the second year in a row" is what anyone (bothering to really think about it) would have expected 6 months ago.

What changed was the perception of those fairly boring numbers and how they were generated. Wal-mart (WMT) landed a sucker punch on Target (TGT) by going to deep price cuts earlier than last year. As a result, Walmart's sales improve and Target's get weaker. The "pie" stays the same.

The second part of the puzzle, the part that matters, is earnings for the retailers. I didn't think margins would be good this year before Walmart hyped their holiday discounts. For that matter, I'm not so sure Walmart's well-hyped holiday discounts aren't 99% PR fluff.

But it doesn't matter. Walmart's move made players in any competing space (any discounter, most general apparel guys and electronics vendors) start promoting earlier. Being discounters, they'll also go deeper than they expected. Or they'll just get stomped by Walmart. Walmart is big enough and, this year, good enough to matter that much.

So... I'm looking for a decent top line but I think margins will be soft for all but the best specialty stores. What's remarkable to me is how surprising my/ this scenario seems to be in some camps.

Responding to Mr. Burns' email, Minyanville Professor Francis John Succo ("The snarky one") bassily responds:

"(Weak sales on Black Friday?) Wait, on CNBC just yesterday they said that holiday sales will be brisk!

Are you saying CNBC could be wrong?"

Snarky J,

My standing condition as an unabashed hussy for any media opportunity which allows me to remain clothed (n.b. If nudity is tasteful and helps develop the character I'm flexible) this topic is sort of the third-rail of 3 O'Clock Highdom.

Of course, that's what makes it fun.

I'm honestly not sure how many times I've offered some sort of variant of my "decent top-line, bad margins" opinion. It's been enough that I was sheepish about taping a segment in which I said the same thing, again, last Monday.

The curious thing is the variety of reactions I get to the opinion. At the beginning of November it made me "a slightly optimistic (confused) bear", for the purposes of television. Everyone hated the retail stocks then so, by the rules of sound-bite, I hated them as well, based on my dour earnings expectations.

I'm not even sure if I would be scored as wrong or right in my view, due to the naunce constraints of the 30-second spot.

Last Monday I listened to two segments for the On The Money show we taped, which will air on Black Friday. In the segment prior to mine our own grizzled vet, Herb Greenberg, was caught in a full-on Bull stampede.

"The Xbox360 is the hottest thing since sliced bread! Lines around the block! HUGE!" they roared as I squirmed like a dog at the end of a dock with a ball floating below him. I badly wanted into the game (a fact of no surprise to frequent readers).

After Herb fought them off I got my turn. I ran through my view with as much "freshness" as possible. Now my take was read as my being a badly stung bear, waffling in the face of stunningly strong sales.

I had changed nothing about my message, save the phrasing. "Sales are going to be fine. Earnings will be soft." but I got shouted down like a tech bear in early 2000 ("Hi, Fleck!").

The points are these:

  • Being "sheepish" about anything just gets in the way of crowd pleasing television.

  • I don't think anyone, ever, should watch financial television in hopes that the folks onscreen can provide them with any "answer", right or wrong. Not even my segments.

A good chunk o' financial television is one which is (at least mildly) entertaining and provokes a slightly fresh way of thinking. Bad segments, offensive though they can honestly be, at least can help reveal the Mood and expectations of the Street.

To the latter point, I can tell you that the expectations for Black Friday have gotten much, much higher than they were 30 days ago. My feeling about the results hasn't changed but how those results would/will be received has.

Which, to me, suggests selling the numbers (and most of the retailers) when the numbers come out next week.

Of course, I could be wrong*, even if I am occasionally on basic cable.

(* But I'm not)

ERTS, don't it?

My over-under for the Microsoft (MSFT) XBox360 being sold-out was waaaaaay off. I thought they could make it to Friday and the shelves seem to have been bare before sunrise of day 1.

The sales are ripping but the reviews, particularly for the first iteration of titles, are mixed. Electronic Arts (ERTS) is getting particularly ripped for releasing a sports line-up that plays like stripped-down versions of the latest games for the old consoles, only with better graphics.

It's actually possible that ERTS has done some reputational damage with the titles, which are being called "a year, or maybe two" from being up to snuff. For that matter, the graphics are falling into the Uncanny Valley for some. The effect is discussed in this... um... financial journal (ok, ESPN). Suffice it to say that the characters make some respond with physical illness and hatred.

Gobble

With those cheery sentiments I'm off to Canadian-Proof our house prior to Todd-O and the Quasi-Missus' arrival tonight.

We've got a very full house for my favorite Holiday, for which I'm endlessly Thankful.

But I'm not going to the airport to pick them up.

Thank You to all of you who put up with my "Quirky" linguistic stylings and those who give me the Soap Box from which to present them. We are shaping a great community in the 'Ville and I'm honored and grateful to be part of it.

No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

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