While Wal-Mart Stores, Inc. (NYSE: WMT) keeps racking up sales as the king of retail in a depression, competitors certainly don't want to lose out on holiday sales. In fact, with such a bleak holiday shopping season predicted by multiple market pundits, some retailers are trying to divert those upcoming Wal-Mart shoppers into their own shoppers. But how? Kohl's Corp. (NYSE: KSS) held a three-day Christmas sale that actually ends today -- the day before Black Friday. The department store-style retailer offered price cuts to the tune of 40% during the last three days in an attempt to steal some of Wal-Mart's customers. You know, the ones who will brave chilly temperatures and 5:00 a.m. waiting lines come Friday morning. The same goes for retailer Macy's, Inc. (NYSE: M). Macy's planned its biggest discounts last week, trying to pull in Black Friday shoppers a full week early.
Did the strategy work? This year would be a hard year to measure since not all things are equal. Shoppers are reluctant to pull out the purse or wallet, the stock market is psychotic, home sales are at a standstill, unemployment is rising fast and the economy is circling the average American like a shark.
But then again, this is why competitive pressures have surfaced: retailers are having to fight tooth and nail for every shopper dollar this year, and all the stops must be pulled out. A Gallup poll recently indicated that Americans will spend an average of $616 on gifts this year, a 29% drop from 2007. When a third of the holiday retail dollars go away, it s bare-knuckled fight among retailers - nothing less.
Business is crummy, but at least the Macy's Thanksgiving Day Parade is a go. It's hard to believe, but the day of thanks is upon us. Despite the struggling economy, a near depression, and what is expected to be a long recession, we do have much to be thankful for.
What started as a pricking of the speculative bubble in housing became a wake up call for the dangers of too much debt. We are full bore in crisis mode and, yet, if you really look at it all, things are not that bad. Yes, your portfolio may be down 40% or more, but most of you still have jobs and interest rates are still very low. Bad as this has been, it could be much worse.
Despite the recent news that Hewlett-Packard (NYSE: HPQ) expects first-quarter profits, ending Jan. 31, 2009, to meet or beat current expectations, most companies dare not provide any guidance as the train wreck economy makes it difficult at best to predict sales and revenue.
That certainly is the case at Macy's (NYSE: M). Today, the large department store leader announced third-quarter profit ending Nov. 1 that missed expectations by a wide margin. Macy's lost $42.8 million, or 31 cents per share.
This should come as no surprise, but unfortunately analyst estimates were way off the mark. They were expecting a loss of three cents on higher revenue.
Going forward, the company is in self-preservation mode. Macy's is reducing capital expenditures to $75 million in fiscal 2009, down from the $125 budget for the current year.
The question for M is, can it survive a period of multiple quarters of losses? With $10 billion of debt on the balance sheet, the company has some serious issues to resolve in 2009.
Best Buy Co. (NYSE: BBY) today gave a profit warning that was simply breathtaking.
"Since mid-September, rapid, seismic changes in consumer behavior have created the most difficult climate we've ever seen. Best Buy simply can't adjust fast enough to maintain our earnings momentum for this year," said CEO Brad Anderson, vice chairman and chief executive officer of Best Buy, in a press release.
Same store sales fell a whopping 7.6% in October as consumers stayed away from the big box retailer in droves. Best Buy expects these sales to plunge between five and 15% in the four months remaining in fiscal 2009. Revenue is expected to be between $43.7 billion and $44.5 billion. Annual earnings are seen at $2.30 to $2.90. All of these figures are significantly below expectations.
Chief Operating Officer Brian Dunn said "In 42 years of retailing, we've never seen such difficult times for the consumer. People are making dramatic changes in how much they spend, and we're not immune from those forces."
Given Circuit City Stores Inc.'s (NYSE: CC) recent bankruptcy, it is hardly a shock that Best Buy is having problems as well. People struggling to pay their credit cards and mortgages are not going to be shopping for new plasma screen TVs. Some many not do any holiday shopping at all, which has got some retailers -- even those holding their own -- watching their bottom lines. Even Wal-Mart Stores Inc. (NYSE: WMT) is worried about the consumer.
TheStreet.com's Jim Cramer says you can game the psychology of the market if you want, but know the rules.
I see the plan: Every day that the market looks like it is going down we give $10 billion to some bank! It is sure-fire. Did you notice the momentary weakness in France Monday? Quick, cut checks to BNP, SocGen and Agricole. Why not? When ING (NYSE: ING) (Cramer's Take) looked like it was a disaster, giving $13 billion to that one-time conservative bank turned all of Europe around!
Monday, when there was a moment that we looked weak, when it looked like we were going to go from plus 200 to below 100, Treasury let it be known that there is a whole other round of checks coming for the second-tier players. Who knows? Boom. That plus higher oil prices turned the market around in the upside-down world we are now in! No doubt soon Downey (NYSE: DSL) (Cramer's Take) and BankUnited (NASDAQ: BKUNA) (Cramer's Take) might get checks and then everything will go higher.
Oh, and on top of that, we have a new stimulus plan, one specially designed, no doubt, to move Target (NYSE: TGT) (Cramer's Take) back to its moving average and get Macy's (NYSE: M) (Cramer's Take) off the critical list.
There were two big trades on Wall Street today: One was the bailout trade, which included financial stocks obviously, but other than the big banks, investors also went after the second-tier firm -- the smaller, regional banks. The other big trade was the economy. As the U.S. and global economy slows down, retailers, techs and a variety of materials and industrials will suffer. Investors showed their concerns over the economy today, hammering down many of these stocks down.
Here are a few big losers from today:
Financials - obviously, financials depended on the bailout plan more than others, at least in the immediate future:
Bank of America Corp. (NYSE: BAC) declined 17.6%, while JPMorgan Chase & Co. (NYSE: JPM) slumped 15%. Citigroup (NYSE: C) declined nearly 12%, Goldman Sachs (NYSE: GS) sank 12.5% and Morgan Stanley (NYSE: MS) plunged over 15%.
American Express Co. (NYSE: AXP) was the Dow's biggest loser today with a 17.5% drop thanks to Citigroup cutting profit estimates of the credit card company.
Second-tier banks declined much more:
Bank of New York Mellon Corp. (NYSE: BK) slipped over 27%, CIT Group Inc. (NYSE: CIT) lost 25.5%, Fifth Third Bancorp (NASDAQ: FITB) fell 43.6%, FirstFed Financial Corp. (NYSE: FED) tumbled over 25%, First Horizon National Corp. (NYSE: FHN) slipped 35.7% and National City Corp. (NYSE: NCC) tumbled 63.3%.
The upcoming holiday season may be the worst in decades for retailers large and small. Upscale operations like Tiffany & Co. (NYSE: TIF) could lose big parts of their customer bases as Wall Street layoffs push a number of well-to-do shoppers out of work.
According toThe Wall Street Journal, "As economists predict the worst holiday sales season since the recession of 1991, retailers are fighting back with an arsenal of new selling strategies, staff cutbacks and more emphasis than ever on low prices."
A disastrous holiday season could put tremendous pressure on weak retailers including Sears (NASDAQ: SHLD) and Macy's (NYSE: M). Macy's has already cut back its number of stores. Sears could be forced to close hundreds of its 3,800 K-Mart and Sears outlets.
A cratering of the retail market will cause the companies in the industry toward the sort of disaster Wall Street is weathering. Some of the largest players may not make it at all, and others will have to cut so drastically that they will never again look like they did in better times.
Douglas A. McIntyre is an editor at 247wallst.com.
In case you haven't noticed lately, times are tough for the American economy, and this volatility is more than likely going to carry over into the upcoming holiday shopping season, according to the Wall Street Journal (subscription required).
In an article today, the WSJ discusses the probability of a grim shopping season, reporting that economists are predicting that retailers are likely to see their lowest sales volumes for the past 17 years. These dark forecasts come from both research and consulting firms Deloitte LLP and TNS Retail Forward Inc., but the scary part is that these predictions were made before the most recent economic troubles, and the harsh reality of what lies ahead for retailers could prove to be even worse than these current predictions.
Let's take a second look at the major factors that are going to contribute to a weak holiday shopping season (granted the list could be made much longer, but let's just highlight the main factors for now):
High fuel prices, which have fallen over the past month but are still running at historically high levels
Kohl's (NYSE: KSS) closed at $51.04 Tuesday. KSS overall option implied volatility of 46 is near its 26-week average according to Track Data, suggesting non-directional price movement.
Dillard (NYSE: DDS) closed at $13.05 Tuesday. DDS September option implied volatility of 80 is above its 26-week average of 65, indicating larger price movement.
Macy's (NYSE: M) closed at $21.62 Tuesday. M overall option implied volatility of 55 is near its 26-week average according to Track Data, suggesting non-directional price movement.
J.C. Penney (NYSE: JCP) closed at $40.63 Tuesday. JCP comparable store sales decreased 4.9% for the four-week period ended August 30, 2008, in-line with company guidance. JCP September option implied volatility of 50 is near its 26-week average, suggesting non-directional price movement.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
TheStreet.com's Jim Cramer says with gas coming down further, the coming rally could be broad and fierce.
The great hurricane fakeout leaves us with oil much lower than it began, having launched itself from $112. Now that the $110 level's been breached and natural gas has gone as low as $7.50, we can begin to put together a holiday scenario that might -- just might -- explain the incredible run in retail that's been going on.
The presumption in retail, if you use Wal-Mart (NYSE: WMT) (Cramer's Take) as retail, was that once the stimulus wore off, presumably last month, the stocks would get hammered. On Aug. 7, Wal-Mart as much as told you that, and the stock dropped to $57 from $60.90.
Ever since then, it has been creeping up. Kohl's (NYSE: KSS) (Cramer's Take) dropped a point from that warning, going from $45 to $44. It is now at $49. Macy's (NYSE: M) (Cramer's Take) went from $19.80 to $18.90 before bouncing to $20.82. Jones (NYSE: JNY) (Cramer's Take) went from $17.40 to $17.20 before roaring to $19.80. Ralph Lauren (NYSE: RL) (Cramer's Take), because of a great quarter, didn't even get hurt, rallying from $67 to $75.
JP Morgan upgraded O'Reilly (NASDAQ: ORLY) to Overweight from Neutral, citing increased demand and CSK acquisition synergies.
Yamana Gold (NYSE: AUY) was raised to Outperform from Sector Perform by RBC Capital, based on valuation and the firm's expectation that gold will rally.
HSBC upgraded KLA-Tencor (NASDAQ: KLAC) to Overweight from Neutral with a $44 target.
Analyst downgrades:
Bernstein dropped DISH Network (NASDAQ: DISH) to Underperform from Market Perform, citing continued weak operations, declining cash flow, and satellite sector headwinds, among other reasons.
Macy's (NYSE: M) was downgraded to Neutral from Buy by Goldman Sachs based on valuation.
Kohl's (NYSE: KSS) was also dropped to Neutral from Buy by Goldman based on valuation.
UBS downgraded Dr Pepper Snapple (NYSE: DPS) to Neutral from Buy based on valuation.
Analyst initiations:
Salesforce.com (NYSE: CRM) was started with a Buy rating by Kaufman Bros., which believes the core on-demand CRM application market is nowhere close to full penetration.
Caris initiated Eli Lilly (NYSE: LLY) with a Below Average rating, citing the company's Zyprexa and Cymbalta patent expirations.
Leerink Swann assumed coverage of Amgen (NASDAQ: AMGN) with an Outperform, as the firm predicts that the company's denosumab will allow the company to substantially increase its earnings starting in 2010.
TheStreet.com's Jim Cramer says lower gas prices mean the numbers are too low.
People are missing this retail move. They are missing it because the market is deciding right now that the guidance companies are giving is just plain wrong given the $3.50 at the pump (although premium's a lot more expensive). They are also recognizing that the strong are surviving and thriving and taking share in a radical fashion -- witness Lowe's (NYSE: LOW) (Cramer's Take), which must be killing Sears (NASDAQ: SHLD) (Cramer's Take) and the mom-and-pop shops out there.
When I met with Lowe's last year, they told me that they have picked up share in every downturn. They did not know when the downturn would end or when you would see the results, but they were confident that the longer the downturn lasted, the more likely they would be to have pulled away from their competition.
Macy's (NYSE: M) didn't do too well in its second-quarter according to the earnings report, but it did beat profit expectations. Net revenues saw a decline of 3%, coming in at $5.7 billion. Adjusted net income from continuing operations was $0.29 per diluted share. According to this article, the call from the wizards of Wall Street was for $0.19 per share.
That's quite a beat, I'll grant you, but there are some caution signs investors must read regarding Macy's. As the article mentioned, the outlook isn't that great, and the retailer doesn't expect much from same-store sales as it goes into the autumn. In fact, sales should either be flat or will decline slightly. Same-store sales represent an important metric for retail chains, and if that metric can't be delivered, then investors need to take notice. For the quarter, comps were down a little over 2%. Over the last six months, comps were down by roughly the same amount.
Net cash provided by operating activities actually went up 44% to $592 million. The gross margin also improved. Cool stuff, perhaps, but they still don't change my bearish inclination toward the company. Macy's is still trying to turn itself around and become a player in retail, but it will be tough considering the economic challenges that the entire industry is currently facing. It's not going to be a strong holiday season for the company, and in terms of investment ideas, I'd still look at Wal-Mart (NYSE: WMT) or Target (NYSE: TGT) in the retail sector. I don't see any reason to put money to work in Macy's (some do, though, since the stock is up almost 2% as I write this, and it has done very well over the last month, according to the AOL Finance snapshot).
Disclosure: I don't own any company mentioned; positions can change at any time.
U.S. stock futures were mixed Wednesday ahead of retail sales, import price data and oil inventories reports. Analysts expect retail sales, to be reported at 8:30 a.m., rose 0.5% in July. Futures may find direction after the report. Meanwhile, oil futures rose ahead of the inventory report due out at 10:35 a.m., the dollar fell against some currencies and gold futures rose. [Update: Following a decline in retail sales in July, futures turned lower.]
Deere & Co. (NYSE: DE) has just reported quarterly results and shares sank 6.1% in premarket trade. The world's largest maker of farm machinery, said earnings in the latest quarter rose 7% and revenue increased 17% as soaring crop prices boosted global demand for its agricultural equipment. The company, however, missed on earnings and gave forecast that was lower than estimations.
Earnings are still due from Macy's (NYSE: M), among others.
Nvidia (NASDAQ: NVDA) shares rose 7.3% in premarket trading despite reporting a $121 million loss Tuesday. Investors liked that Nvidia announced a stock buyback of $1 billion and predicted margin improvement.
Applied Materials (NASDAQ: AMAT) also rose, up 1.2% in premarket trading after the largest maker of semiconductor-production machinery forecast better-than-estimated orders and CEO Mike Splinter said conditions will improve. Its fiscal third-quarter profit plunged 65%, but sales results beat estimates.
TheStreet.com's Jim Cramer says all that money has to go somewhere, and this is a likely destination.
Clash of the ideals! Oil's down, and what can you buy when there's so much bad bank news? What can you buy when Wachovia (NYSE: WB) (Cramer's Take) is boosting reserves and Morgan Stanley (NYSE: MS)) (Cramer's Take) is still being pursued by authorities and JPMorgan (NYSE: JPM) (Cramer's Take) says July stunk and UBS (NYSE: UBS) (Cramer's Take) is so tarnished that you can't believe it was once the most conservative blue chip out there.
The answer is tech, of course!
Wait a second. Would anyone mind if we actually had a reason to buy tech beyond the Kindle, the device that made Citigroup gaga about Amazon (NASDAQ: AMZN) (Cramer's Take) -- not that you needed a device to do that.
Sure, we have pre-seasonality. Remember, you are supposed to buy tech at the end of the summer, not that anyone waits that long.
Even with the stimulus checks, retail sales numbers for June and July have been nothing to cheer about. And this coming week should provide another look at how things have been shaping up in the apparel and accessories arena. A number of companies are scheduled to release quarterly numbers, from upscale retailer Nordstrom to the parent of discounter TJ Maxx, from hipster Urban Outfitters to global giant Wal-Mart. Here's a look at what Wall Street is anticipating.
Analysts surveyed by Thomson Financial expect the following to report strong earnings growth when compared to the same period of the previous year.
While Wal-Mart Stores, Inc. (NYSE: WMT) keeps racking up sales as the king of retail in a depression, competitors certainly don't want to lose out on holiday sales. In fact, with such a bleak holiday shopping season predicted by multiple market pundits, some retailers are trying to divert those upcoming Wal-Mart shoppers into their own shoppers. But how?
Business is crummy, but at least the Macy's Thanksgiving Day Parade is a go. It's hard to believe, but the day of thanks is upon us. Despite the struggling economy, a near depression, and what is expected to be a 
Best Buy Co.
In case you haven't noticed lately, times are tough for the American economy, and this volatility is more than likely going to 
Kohl's
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U.S. stock futures were mixed Wednesday ahead of retail sales, import price data and oil inventories reports. Analysts expect retail sales, to be reported at 8:30 a.m., rose 0.5% in July. Futures may find direction after the report. Meanwhile, oil futures rose ahead of the inventory report due out at 10:35 a.m., the dollar fell against some currencies and gold futures rose.
Even with the stimulus checks, retail sales numbers for June and July have been 
Cramer on BloggingStocks: A troika of opportunity and trouble 
Before the bell: Wall Street headed higher; automakers, retailers in focus
Waiting for the other shoe to drop: The looming credit crisis
