The original Montgomery Ward retail strategy focused on selling quality merchandise over long distances. Aaron Montgomery Ward had a vision of providing first-quality goods, at reasonable prices, to rural customers who might otherwise not have had such merchandise available to them. The first Montgomery Ward catalog appeared in 1872 as a single sheet of paper, listing 163 items for sale, with ordering instructions.
By 1883, the Montgomery Ward catalog, dubbed the "Wish Book," had grown to 240 pages and 10,000 items. It wasn't until 1896 that Montgomery Ward faced any serious competition in the mail order field. That was the year Richard W. Sears fielded his first catalog and the fierce competition between the two companies began. By 1904, Montgomery Ward was mailing as many as three million, four-pound catalogs to its loyal customers across the country. In 1908, the company opened a 1.25 million square foot distribution center and headquarters north of downtown Chicago.
In 1926, Montgomery Ward opened its first retail store in Plymouth, Indiana, while continuing to operate its catalog business. The company rebuffed a merger offer from Sears in 1930. All was well until the early 1950s when the automobile gave birth to suburbia, and Montgomery Ward held the city ground while its competitors moved out to the strip malls. By the mid 1960s, the company's catalog sales began to weaken and the company struggled into the 1970s after a merger with Container Corporation of America. In 1976, the company was acquired by Mobil Oil, and an aggressive restructuring buoyed the company. However, its catalog operations ceased in 1985, as its retail outlets underwent transformation from department stores to specialty stores. A leveraged buyout then took the company private in 1988.
Cash-strapped bargain hunters have made it possible for discount retailers Big Lots Inc. (NYSE: BIG) and Costco Wholesale Corp. (NASDAQ: COST) to report healthy profit increases on Thursday.
Big Lots reported that its first-quarter profit rose 20% to $34.5 million, or 42 cents per share, from the same period in the prior year. Quarterly sales grew 2% to $1.15 billion.
Analysts surveyed by Thomson Financial had predicted a first-quarter profit of 36 cents per share on revenue of $1.14 billion.
The Columbus, Ohio-based company said that same-store sales increased 3.4% during the quarter, and also said that results were helped by having about 30 million fewer shares outstanding.
Shares of Big Lots closed up $2.18, or 7.6%, to $30.71. Shares have risen 92.1% since the beginning of the year.
Father's Day is around the corner. Why not spend some time looking at the coming earnings and how Dad's Day may have an impact. It is funny to see how many of the companies reporting earnings this week actually have links to Father's Day.
While this column has been obviously bearish of late, there are a few potential winners that may appear, just in time for the big day. Time to stock up on gifts for dear-ole-dad, or get farther away from stocks? You tell me... (by the way, comments and ideas are always appreciated)
Monday, May 26
Markets will be flat. I am certain that stocks on the U.S. Market will close at the exact price they closed last Friday. But what do I know!
While the earnings season is beginning to wind down for the current quarter, there are still plenty of results to come. Here's a peek at what analysts surveyed by Thomson Financial are expecting from companies scheduled to report results in the final week of May 2008.
These companies are expected to post earnings growth, compared to the same period in the previous year:
Dell Inc. (NASDAQ: DELL) down 2.9% to 33 cents per share, on $15.66 billion in revenue
TiVo Inc. (NASDAQ: TIVO) is expected to swing to a loss of a penny per share, compared to a penny profit a year ago, and report $55.62 million in revenue. And analysts expect Borders Group Inc. (NYSE: BGP) to narrow its loss 7.8% to 47 cents per share, on $801.11 million in revenue.
Earlier this week, Jim Cramer pondered whether the U.S. economy had reached bottom, given such recent signs as stronger-than-expected retail sales and investor interest in homebuilders. In particular, he said he's looking at next week's quarterly results from Lowe's (NYSE: LOW) and Home Depot (NYSE: HD) as a sign for the housing sector and for the potential market rally.
Lowe's is expected by analysts surveyed by Thomson Financial to report second-quarter earnings of 39 cents per share, down 18.8% from 48 cents per share in the same period in 2007, but up 28.2% from 28 cents per share in the previous quarter. The company has provided positive surprises in four of the past five quarters.
North Carolina-based Lowe's is the second-largest U.S. home improvement chain, behind rival Home Depot, and the second-largest appliance retailer after Sears (NYSE: SHLD). In the past year, the company's revenues were $48.2 billion and its net income totaled $2.8 billion. Its long-term EPS growth forecast is 12.7%, which is better than its industry average. The consensus recommendation of analysts remains to buy Lowe's.
The stock is up 9.9% since the beginning of the year, but has fallen 20.5% from a year ago. It trades at a P/E ratio of 13.38. Shares closed Friday at $24.89.
Penney (J.C.) (NYSE: JCP) is a little timid right now in the face of the recession. According to this AP piece, CEO Mike Ullman, speaking at an analysts' meeting, is reducing the number of new locations he plans to debut this year -- look for 36 instead of 50. The CEO said that he doesn't like the unpredictability that currently exists in the macroeconomic world.
He's right to be careful. Consumer confidence might head lower from here. And considering that J.C. Penney reported terrible comps for March -- the retailer saw a decline of 12.3% -- now is probably not the time to be in expansion mode. Instead, management needs to figure out how best to connect with the mall traffic. This will necessitate new marketing campaigns that aggressively promote the brand and the shopping experience, and differentiate the chain from competitors such as Sears (NASDAQ: SHLD) and Macy's (NYSE: M). Retailers, in my opinion, often underestimate the value of investing in creative campaigns that focus more on the experience a consumer receives when he or she is in the store rather than the perceived value that a consumer has regarding the inventory portfolio.
In terms of investment potential, J.C. Penney is not a retail company that I'm seriously looking at right now. I'll wait to hear more financial updates from management; it isn't expensive at the moment, and it is certainly eons away from its 52-week high, but I just don't have a good feel for its growth potential yet. Interestingly enough, I wrote about American Eagle Outfitters (NYSE: AEO) the other day, another cheap retail stock; both J.C. Penney and American Eagle Outfitters might be considered similar stories in terms of valuation, but for me, I find American Eagle to be the more attractive candidate from a brand viewpoint and in terms of bouncing back big when the economy improves (that's my current outlook, at least). We'll have to wait and see how this mall story evolves.
Disclosure: I don't own shares in any of the companies mentioned; positions can change at any time.
In a story posted by The Consumerist, an eloquent and apparently intelligent gentleman referred to as Tom, relates a story of turmoil which he has experienced with a Sears Card purchase he made at Sears Holding Corporation (NASDAQ: SHLD). The story goes like this:
Tom states that he purchased a television from a Sears store. It was a deeply discounted model, at a price he couldn't refuse. Tom apparently paid for his purchase with his Sears Card and then went out of town. Upon return from his trip, Tom called Sears to see when his new television would be delivered. It wasn't available. He would have to wait. Another week passed and Tom contacted his Sears retailer again. They still had no television to deliver to him, so after a terse verbal tug-o-war with the manager, Tom was offered an alternate television at a similar discount. He purchased the surrogate unit and left the store satisfied. However, Tom's problems had only just begun.
It seems that Tom has been unable to recover the funds he paid for the television which Sears couldn't deliver. Try as he might, the best Tom has been able to accomplish has been a serious test of his fortitude. He's hit dead ends from one end of the Sears operation to the other. He has been able to reasonably ascertain that Sears management's telephones don't interlink with one another. Meanwhile, the phantom television model remained on display in the store. Might this possibly have been in violation of consumer bait and switch laws?
When Edd Lampert merged K-Mart and Sears Roebuck into Sears Holdings Corp. (NASDAQ: SHLD), he probably didn't plan for a complete and unmitigated disaster. But, from all accounts, that is what the company is at this time. Its sales have consistently plummeted for more than just a few quarters now, the competition has killed it. Sears merchandising frankly is really, really bad -- and on and on.
Lampert's grand vision is still alive, but the realities of running a national retailer in an intense environment have not proved easy at all. What's keeping Sears Holding's shares above $100, you say? Check out the company's vast real estate holdings. Don't think for a second that this isn't the reason Sears is majority owned by Lampert, who could care less about the retail end of the business.
Still, you have to run a business. It's always nice to see that a former CEO who appeared to do virtually nothing in terms of performance get an annual base salary of $1 million through the next few years -- even though he's no longer at the company. Ousted CEO Alwyn Lewis, who was highly regarded when recruited for the Sears Holdings CEO spot but who was wholly ineffective, will receive his salary package through March 24 of 2010. Lewis will also continue to have health and welfare plan availability along with having his remaining stock and option awards vest until 2010 as well.
Even though the boards of public companies should be completely separate from the management and owners of the company, it's hard to see that they're not when excessive, after-term packages like this come to light. Pay for performance? Hogwash. CEO compensation committees can be as corrupt on company boards as those Enron folks from years back. Well, to a degree, anyway.
The upscale retailer has embarked on an aggressive store expansion. The company will add 1.11 million square feet in 2008, more than twice that which was added in 2007. With that expansion in square footage has come an commensurate increase in short sales volume (those sold with the intention of betting on the stock price decreasing in JWN).
Analysts are fearing that while Nordstrom may have it going on in terms of hitting the fashion bulls-eye, such aggressive expansion may negatively affect the company. The same Bloomberg story quotes a Wall Street analyst who said that "slowdown in square-footage growth'' would make her more positive on the Nordstrom story.
Much as an astute investor in the stock market would use price pullbacks to add to positions he or she likes, Nordstrom is leveraging cut-backs in store expansions at competitors to land what it feels are prime locations for new stores.
With fears that the U.S. consumer will suffer more than he is presently, investors are nervous that store expansion may leave Nordstrom with a lot to sell and not a whole lot of buying going on.
Zack Miller is the managing editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund.
TheStreet.com's Jim Cramer says it could be part of a strategy to pounce when the economy sagged. Lowe's can take the pain; Home Depot can't.
Maybe Lowe's (NYSE: LOW) (Cramer's Take) sees what we saw this morning: A Home Depot (NYSE: HD) (Cramer's Take) that's a shadow of its former self. Maybe LOW is pulling a Verizon (NYSE: VZ) (Cramer's Take) and just going out to destroy the competition with lower rates and short-term hits to performance.
Yesterday I was torn between what really drove up the price of Lowe's: the January low point with February showing some improvement, or an overall belief that the early cycle is starting and the economy has bottomed courtesy the Fed rate cuts. The reaction last night to Nordstrom (NYSE: JWN) (Cramer's Take) was similar: terrible earnings but hope that things will get better. It's is now well above where it hit its low and it is hard for me to believe that it could go back there.
You couldn't tell which theory was winning out for either Lowe's or Nordstrom because I am sure you had buyers of both plus the ubiquitous short-sellers who lurk everywhere and are prone to cover on a moment's worth of positive price action (as we saw in Goldman Sachs (NYSE: GS) (Cramer's Take) yesterday before a new round of estimate cuts, courtesy special purpose vehicles that some alleged cognoscenti will claim they saw coming).
Super-investor Eddie Lampert has cut his stake in Citigroup Inc. (NYSE: C) by 31%, leaving him with a position of 19.1 million shares valued at a little under $500 million. It is likely that Mr. Lampert sold the shares at a substantial loss.
Lampert's large presence in the stock was a source of confidence for battered bulls who watched the stock decline through subprime write-downs and a managerial shake-up. Long considered to be one of the great value investors, Lampert's latest 13-F filed with the SEC shows stakes in Acxiom Corp. (NASDAQ: ACXM), AutoNation Inc. (NYSE: AN), AutoZone Inc. (NYSE: AZO), Citigroup, Home Depot Inc. (NYSE: HD), and, of course, Sears Holdings Corp. (NYSE: SHLD).
Lampert's decision to cut his stake in Citi has to make investors nervous. He's ridden the stock down for months, and it hasn't exactly been rebounding.
Last year was tough for Lampert, with Sears' stalled turnaround bringing him poor returns and the worst publicity of his career.
Eddie Lambert may have to loan Sears Holdings (NYSE: SHLD) some money. Cash at the company be getting very tight. According to the Wall Street Journal, "some analysts wonder whether falling sales, slimmer profit margins and other woes are causing cash flows to decline to a level that could hinder a turnaround."
The last cash balance that Sears announced was lower than most analysts expected. If the company needs to spend money to improve its stores or increase inventory in products it thinks will sell well, it could draw down the cash level even further.
For Lampert, the bad news keeps getting worse. Sears stock has staged a mini-rally over the last two weeks, moving from below $85 to $103. News about cash problems could push the shares back down.
Lampert made the classic error of thinking that with Sears and K-Mart 1+1=3. In reality, he took two weak companies and saved some money in a merger. The problem was that the companies got even weaker.
Who says that hedge fund managers don't make good corporate chiefs?
Douglas A. McIntyre is an editor at 247wallst.com.
This post is part of a series on some of the most memorable companies that have disappeared.
Big Lots reported that its 
Lowe's is expected by analysts surveyed by Thomson Financial to report second-quarter earnings of 39 cents per share, down 18.8% from 48 cents per share in the same period in 2007, but up 28.2% from 28 cents per share in the previous quarter. The company has provided 
In a story posted by 
When Edd Lampert merged K-Mart and Sears Roebuck into 
Super-investor 
Starbucks: The next McDonald's
Wal-Mart's launch of $20 slimming jeans will be a huge success
Why I spent some of my stimulus check on GE
