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Misery Loves Company



Normally the pre-Christmas price cuts by retailers are a subtle, almost stealthy thing. The tension in the merchant's soul boils down to the need to create Holiday "Buzz" vs. the simple idea that "'tis the Season when demand is highest; if you can't charge full price now what on earth are you going to do in July when stores are empty". What's more, nobody wants to be seen as cutting prices too early, lest they subject themselves to downgrading axes (the gist of the Ann Taylor (ANN:NYSE) estimate cut this morning).

Heck, this old timer can remember back when retailers would hold out until Christmas Eve prior to marking anything down (remember the now-quaint notion of "After Christmas Sales"?).

I agree with the notion that Wal-Mart (WMT:NYSE) "isn't the Wal-Mart we used to know". They aren't performing up to their traditional standard and they are finally running out of places to grow. The problem for other retailers isn't that Wal-Mart is still great; the problem is that Wal-Mart sells over a quarter of a trillion dollars of goods per year and they've expanded into everything from groceries to high-end televisions.

Wal-Mart "blinking first" by using the press to announce what amounts to a massive Sale matters to the rest of retail. To take one (book talkin' but not advising or suggesting) example, you can worship at the altar of Best Buy (BBY:NYSE) as an operator. You can correctly offer that customers prefer to buy electronics at BBY vs. WMT. What you can't reasonably assert is that the world's biggest retailer going scorched earth on margins with one month to go before Christmas isn't going to hit BBY should WMT opt to focus promotions on their nascent electronics biz.

If I ran a specialty chain I'd be shvitzing as I waited for the next WMT circular; praying to the Ghost of Sales Future that the giant picks a different segment to destroy, margin-wise. As an investor I'll be paying attention for different reasons; whichever segment Wal-Mart chooses to use for their re-energized "Lowest Prices" effort, the competition in that space is going to be hard-pressed to hold the line on margins.
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