This holiday season retailers are gearing up for one of the worst years yet. They've read the news and know that unemployment is up, people are putting off large purchases, and we're in the midst of a financial crisis. These unfortunate facts are not only reflected in most retail store's bottom lines, but also in stock prices. The Retail HOLDRs (AMEX: RTH) exchange traded fund (ETF) is showing a bit of an unexpected trend as it recently outperformed the market from its highs in September, 2008.
It must be noted that the success of RTH is its share of Wal-Mart (NYSE: WMT) which is a full 26% of the holdings. RTH has done very well in the current economic environment as people are looking for the best deals across the boards. Year to date, RTH is down about 25%, compared to the S&P which is down about 40%. In fact, not only is Wal-Mart not following economic predictions for the retail market, but other retail stores may also see less decline or even growth in the coming weeks. This is not the first time predictions have been dire, and yet the retail industry ended up smelling like a rose.
If you feel the outlook is more doomsday than it needs be, or if you see that the situation is actually ripe for a retail rally, consider buying RTH, who not only holds significant stock in Wal-Mart but also includes well known and big retailers such as Target Corporation (NYSE: TGT), Lowes Companies (NYSE: LOW), Walgreen (NYSE: WAG), Home Depot (NYSE: HD) among many other household names.
When the Bureau of Economic Research declared that the recession had officially begun in December 2007, the entire retail sector shrugged its shoulders and said, "No kidding."
Shares of companies that deal directly with the consumer, except for the deep discount retailers, have known for some time that the economy was struggling. Sales have been declining steadily and, with the deteriorating operating environment, shares of the retail stocks have been absolutely crushed.
The entire retail group is one of the biggest losers in the market this year, with some stocks down 80% to 90%.
That said, those retailers that offer big discounts, including Wal-Mart (NYSE: WMT) and Big Lots (NYSE: BIG), are doing much better on a relative basis.
Even though Black Friday sales were better than expected, most retailers saw their November sales plunge. As I posted in April, Wal-Mart Stores, Inc. (NYSE: WMT) would likely benefit from consumers' recession diet. That has proven to be a fairly safe bet, but the scary thing is that just about every other retailer is taking a hit.
A glimmer of good news is that for many of those that hurt, the results were not as bad as expected. Here are the actual results of five retailers (with expected results in parentheses):
An emerging theme is that expectations are so bad that retailers seem able to exceed them. However, there is no guarantee that such outcomes are likely to continue. If retailers do better than expected then forecasters may raise their estimates until retailers can't exceed them.
Big Company Stocks Trading Under $1 and Those Heading There Wall Street's big plunge over the past few months has pushed some very well known stocks down to pennies. Among the companies trading under $1 include Fannie Mae, Sirius XM, Thornburg Mortgage, Charter Communications and Level 3. In addition, a number of other big names could easily get there very soon. Among them are Ford Motor, Citigroup, E*Trade, AIG, Sprint, New York Times Company. http://www.247wallst.com/2008/12/big-company-sto.html Companies Thriving in a Recession While many businesses struggle during the recession, a handful of U.S. and global companies are riding out the storm in good shape. Among them are Wal-Mart, Abbott Labs, McDonald's, P&G, Costco, Kraft Foods, J&J, Novartis and Homeaway. http://www.usatoday.com/money/economy/2008-12-03-recession-proof-companies_N.htm
General Motors Corp. (NYSE: GM), Ford Motor Co. (NYSE: F) and Chrysler executives are returning to Congress for what many see as a crucial hearing as the automakers hope will persuade skeptical lawmakers to bail them out with a $34 billion in emergency aid. Still, a top Senate Democrat wants to hand their problem to the Federal Reserve. Automakers executives are also considering accepting a pre-arranged bankruptcy as the last-resort price of getting a multibillion-dollar government bailout, according to Bloomberg sources. GM and Ford shares are down 6.1% and 7.7% in premarket trade (8:10 am). As of 11:45, GM shares declined nearly7%, Ford's were flattish.
Wal-Mart Store Inc. (NYSE: WMT) November same-store sales were expected to fall 7% gain 2.1%, but rose 3.4%. WMT is trading 2.8% higher in premarket (8:10 am). WMT shares traded higher during the session. Costco Wholesale Corp (NASDAQ: COST) reported that November same-store sales fell 5%. Limited Brands Inc. (NYSE: LTD) reported November same-store sales fell 12%.
Toll Brothers (NYSE: TOL)reported a loss of nearly $80 million, or 49 cents per share, including about $175 million in pre-tax writedowns. Without the charges, the company reported a profit of 23 cents per share. Revenue fell to $698.9 million from $1.17 billion a year ago. TOL beat analyst estimates of 46 cents per share on revenue of $681.4 million, according to Thomson Reuters. TOL decline to issue guidance for next year. As of 11:47, TOL shares were 9.5% higher.
Merck & Co. (NYSE: MRK) issued guidance, saying net income in 2009 may miss analysts' expectations as the drug maker trying to make up for falling sales of its top-selling cholesterol pills with cost cuts, including job reduction. Merck made no change in its forecast for 2008 earnings. MRK shares traded 3.6% lower in premarket (8:14 am). Shares of MRK traded down 3.6% by 11:47.
You knew it would happen. When a company as controversial as Wal-Mart (NYSE: WMT) has one of its employees killed in a Black Friday melee, it's only a matter of time before the company starts getting the blame.
Long Island police and a lawyer hired by the deceased worker's family have concluded that the company should have had better crowd control.
"Hundreds of stores around the country have these kinds of sales, but a tragedy only happens if you don't prepare," attorney Jordan Hecht told (subscription required) The Wall Street Journal. "You need to have people line up in a queue in an orderly fashion, with people giving them updates."
Wal-Mart defended itself by saying that it had set up barricades, hired third-party security guards and had extra staff on hand.
And what of the police's contention that the security was inadequate? It turns out that the police were called to the store before the victim was trampled to death because of the large crowds, but they quickly left before the doors opened. (Read more about that in this Newsdaystory.) So the police seemed to think everything was fine at the time but are now blaming inadequate security after the fact. I'm not sure that makes sense.
The real blame here falls on the people who trampled someone to death. The victim's family should sue Wal-Mart for whatever they can get, but it's pretty tacky for the police to be blaming Wal-Mart for a tragedy that happened after they left.
December Trading Strategies After a stomach churning November, most investors would be happy to just get out of 2008. But our experts offer 10 tactics to profit by before putting this year away for good. http://www.marketwatch.com/newscommentary/tradingstrategies
'12 Days of Christmas' Costs Rise 10.9% This Year'12 Days of Christmas' Costs Rise 10.9% This Year That's this year's cost, according to the annual "Christmas Price Index" compiled by PNC Wealth Management, which tallies the single partridge in a pear tree to the 12 drummers drumming, purchased repeatedly as the song suggests. The price is up $8,508 or 10.9%, from $78,100 last year. PNC checks jewelry stores, dance companies, pet stores and other sources to compile the list. While it is done humorously, PNC said its index mirrors actual economic trends. Seven swans-a-swimming are up 33% this year while a couple items declined: three French hens (down $15 to $30) and six geese-a-laying (down $120 to $240) reflect declines in food prices. http://money.cnn.com/2008/12/01/news/economy/bc.na.us.twelvedays.cos.ap/index.htm?postversion=2008120103
Citigroup Inc. (NYSE: C) plans to sell its Japanese trust banking unit NikkoCiti Trust and Banking for about 40 billion yen ($416.7 million) as it struggles to survive the global financial crisis, according to the Nikkei. Also, a Citigroup fund, Citi Infrastructure Partners, is bidding 7.9 billion euros ($10.2 billion) to buy a Spanish highway operating firm, Sacyr Vallehermoso, the firms said on Monday. Citi shares were down over 12% by 11:30 am.
Yahoo! Inc. (NASDAQ: YHOO) and Microsoft Corp. (NASDAQ: MSFT) -- over the weekend there have been conflicting reports regarding the two. There were reports that Microsoft is going to offer $20 billion for Yahoo's search business, but then other sources said these are completely unfounded. Meanwhile, SAI posted that Sue Decker is the front runner for the CEO job at the portal company. YHOO and MSFT shares were down about 3.5% by 11:30 am.
General Motors Corp's (NYSE: GM)board met Sunday to review a restructuring plan intended to win support for up to $12 billion in emergency funding from the U.S. government, according to different reports. GM's plan includes cuts to executive pay andcould indicate that the company will ask some bond holders to accept equity and a limited cash payout to redeem the debt they hold and focus on fuel-saving technology. GM shares were down about 9% at 9 am.
[Update 8:50 am: Johnson & Johnson (NYSE: JNJ) has agreed to buy breast-implant makerMentor Corp. (NYSE: MNT) for $1.07 billion, or $31 per Mentor share, a 92% premium to Friday's closing price. The deal, expected to close in the first quarter of 2009, is expected to have a dilutive impact to Johnson & Johnson's 2009 earnings per share of approximately $0.03 - $0.05. Of course, MNT shares are up over 88% in premarket trading. JNJ shares were down about 2.7%, but MNT's up about 90% by 11:30 am.]
I have always disliked the moniker 'Black Friday.' Explaining that 'Black Friday' refers to the day that retailers go from losing money to making it strikes me as awkward -- particularly when my first instinct on hearing that phrase is to think of something very bad happening on a Friday.
Which is why today's deadly events combining shopping for the holidays and death seem so strange and sad. This morning, a Wal-Mart Stores (NYSE: WMT) clerk at a store in Valley Stream, Long Island was trampled to death by a crowd of 2,000 people eager to grab bargains. "The impatient crowd knocked the man to the ground as he opened the doors, leaving a metal portion of the frame crumpled like an accordion," according to AP. If store cameras can identify who trampled the store clerk, criminal charges could be brought against them.
Later in the day, two people were shot dead at a Toys 'R' Us in Southern California. The Riverside Country sheriff's department reported an argument between two teenagers preceded the shooting. A third person, a male, apparently pulled out a gun, according to AP.
Seems that even this shortened week was full of news and happenings, in the U.S. and around the world. With Citigroup Inc. (NYSE: C) being bailed out by the U.S. government at the beginning of the week and China announcing fiscal and monetary stimulus plans, the Dow industrials finished in positive territory four days in a row.
But as analysts and pundits, as well as each and every economic release -- in the U.S. and around the world -- remind us, we are not out of the woods yet and the rally has really been a bear-market rally.
Investors looking to take advantage of such rallies, or at least feel they hold stable long-term holdings, can search this week's BloggingStocks' contributors' picks:
Apollo Group (NASDAQ: APOL) and Devry Inc. (NYSE: DV) -- It's often been suggested that educators do well in times of recession and high unemployment as workers look to improve or change their education to get a better job. Leo Fasciocco thinks these two are poised for a breakout.
Dollar Tree Inc. (NASDAQ: DLTR) reported stronger-than-expected earnings this week and also hiked its forecast. Not surprisingly, cash-strapped consumers turn more and more to discounters. Dollar Tree may continue to benefit from the economic downturn and the stock could also experience a short-squeeze rally.
Sears (NASDAQ: SHLD) is scheduled to report earnings for the third quarter on Tuesday, December 2. The expectation is for a loss of $0.49 per share. I think it's therefore safe to say that the retailer won't be turning a profit.
Sears has been one awful retail story as of late. Actually, just about every retailer has been awful as of late. It's no surprise, of course, considering the economy. But Sears has been experiencing challenges even beyond what can be explained by the economy. The company has been missing estimates, same-store sales haven't been great, and if you take the time to talk to people about Sears, or if you follow the comments of pundits, you'll sometimes note a tone of repulsion when it comes to the big chain.
I haven't been a fan of the shopping experience at Sears either, and it's been a very, very long time since I've stepped into a Kmart. In fact, there isn't a Kmart close to me. Eddie Lampert's enormous task of helping to turn this ship around is not one I envy. Of course, many retailers make the mistake of only focusing on merchandising in the stores and figuring out what should be in the weekly circulars. Don't get me wrong, that's important stuff. But Sears needs to engage a branding campaign to make people feel good about its stores, to feel confident about the shopping environment. When you look at TV ads by Wal-Mart (NYSE: WMT) and Target (NYSE: TGT), you can't help but marvel at the branding acumen of those retailers. Sears needs to get creative, too.
Welcome to the 87th installment of The Wal-Mart Weekly, a column dedicated to bringing you insight, wit, facts, results, opinions, and just a bit of everything else when it comes to a very hot topic these days: Wal-Mart.
Wal-Mart Stores Inc. (NYSE: WMT) was set to, as usual, be one of the most aggressive discounters this holiday season in order to move as much inventory as possible. Nowhere is there a better yardstick for just how aggressive one could be than by looking at the deals offered on Black Friday.
As I sat down Thanksgiving Day to a little football and a slew of Black Friday ads to study, it became pretty clear that Wal-Mart was aggressive in its pricing, but by no means the most aggressive. Since it seems consumer electronics continue to be a focus area when it comes to holiday retailing, I focused in on that product segment. So, let's delve deeper and really see who was the most aggressive, shall we?
"If you're going to stay invested, you should look to defensive sectors," explain Ron Rowland and Brandon Clay, who point to consumer staples as a top pick for the current market environment.
"In a bear market, opportunities are usually limited to certain sectors. Surveying the investment horizon, we think the consumer staples sector has the best opportunity for growth in this economy.
"Regardless how the economy acts, people still eat. Consumers may not shop at Whole Foods, but they'll still buy groceries. Companies like Wal-Mart (NYSE: WMT) and Safeway (NYSE: SWY) will continue to rake in revenues from hungry customers.
"In addition, these companies should continue to receive additional revenue from consumers who normally shop at specialty stores, but can no longer afford to.
"Consumers may not be shopping at Sharper Image any more, but there are other creature comforts that will be difficult for Americans to abandon.
"Coca-Cola (NYSE: KO) and PepsiCo (NYSE: PEP) will still sell products during a prolonged downturn. In addition, companies providing toiletries and convenience like Procter and Gamble and CVS Pharmacy stand to do well during a shifty economy.
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.
American Eagle Outfitters (NYSE: AEO), whose competitors at the mall include Abercrombie & Fitch (NYSE: ANF) and Gap (NYSE: GPS), is part of a sector I'm not much of a fan of currently: retail. Just saying the word aloud makes it sound repulsive these days. Don't get me wrong, retail will come back (someday). For now, though, it's difficult to look at the numbers associated with the industry, especially the same-store sales.
Looking at American Eagle, I can see that its third quarter was, as expected, not too inspiring. Adjusted earnings per share dropped 33% to $0.30. Worse, comps plunged 7%. Last year at this time, comps increased 2%.
It's tough out there, folks, and it probably will get tougher. American Eagle, like every retailer out there, is facing a perplexing problem. What's the best way to get traffic through the door? Marketing and promotions. What do retailers have to focus on this Christmas season? Containment of costs. Margins are important, and management doesn't want them to deteriorate too badly. You can see the challenge. Plus, American Eagle can't really count on its target shopper. Young people are oftentimes fickle and ready to jump to some other business near the food court. Not a great position to be in.
This holiday season retailers are gearing up for one of the worst years yet. They've read the news and know that unemployment is up, people are putting off large purchases, and we're in the midst of a financial crisis. These unfortunate facts are not only reflected in most retail store's bottom lines, but also in stock prices. The Retail HOLDRs (AMEX: RTH) exchange traded fund (ETF) is showing a bit of an unexpected trend as it recently outperformed the market from its highs in September, 2008.
When the Bureau of Economic Research declared that the recession had officially begun in December 2007, the entire retail sector shrugged its shoulders and said, "
Even though Black Friday sales were 
You knew it would happen. When a company as controversial as 
I have always disliked the moniker 'Black Friday.' Explaining that 'Black Friday' refers to the day that retailers go from losing money to making it strikes me as awkward -- particularly when my first instinct on hearing that phrase is to think of something very bad happening on a Friday.
Seems that even this shortened week was full of news and happenings, in the U.S. and around the world. With 
Welcome to the 87th installment of The Wal-Mart Weekly, a column dedicated to bringing you insight, wit, facts, results, opinions, and just a bit of everything else when it comes to a very hot topic these days: Wal-Mart.
"If you're going to stay invested, you should look to defensive sectors," explain 
While 
Global Q&A: A rocky road, but profits ahead
Could oil go as low as $40?
Great news: Auto industry considering prepackaged bankruptcy 
