Market Report: So Who's Looking Forward to Fall! Anyone?
The guys at the top at Best Buy (BBY:NYSE) are at an analysts’ conference trying to explain just how they are making their numbers for the year without unloading a lot more flat-screened TV’s than they moved in Q1 or Q2. They even claim that they might just beat estimates by some 3%! In the fine print, they also concede that they might miss estimates by more than 3%.
In This Article:
- J.C. Penney picked up a 10.8% gain in its department store action and Costco added some 7% to same-store sales…
- Overall the numbers came in rather sad: some 15 stores beat expectations, but another 29 major outlets disappointed Wall Street…
- Best Buy (BBY:NYSE) claims that it might just beat estimates by some 3%! But in the fine print, it also concedes that it might miss estimates by more than 3%.
-----------------------------------------------------------------------------------------
Please don’t tell my children, but it’s back to school season at the Lass family compound.
The fact that their mother and I are thinking about September while they are still focused entirely on sleeping in mornings and haunting the swim club in the afternoon has always been a bone of contention.
“Daaaad, why do we have to talk about fall already? It’s depressing!”
Still, in a few days, it will occur to them that maybe, just maybe they can shake me down for something cool -- some high-end designer jeans, or maybe even a new iPod, or better yet, an iPhone! And I think I saw my oldest one stuff the Dell sale flier under the table as I was walking through the kitchen.
I’ve got bad news for them: after various skyrocketing tuition bills and that 70% increase in light, AC and heat from our friends at the local power company, they should consider themselves blessed come September if they can walk into school with a new Trapper Keeper and some pens I swiped from a hotel.
Seriously, we are not talking holes in shoes or charity store coats here, and the mortgage note is well taken care of (we certainly do not have one of those God-forsaken ARM’s that simply invite foreclosure, thank you very much!) But nobody is going anywhere near the Apple store between now and December, that’s for sure.
And from what I am reading, we are a pretty darn typical white-collar American household. Retailers across the country are reporting a rather disappointing July, especially when it comes to high-profit, big-ticket items.
Oh J.C. Penney and Costco are holding up alright: the former picked up a 10.8% gain in its department store action, while the former added some 7% to same-store sales. But overall the numbers came in rather sad: some 15 stores beat expectations, but another 29 major outlets disappointed Wall Street.
Indeed, as I sit to write, the guys at the top at Best Buy (BBY:NYSE) are at an analysts’ conference trying to explain just how they are making their numbers for the year without unloading a lot more flat-screened TV’s than they moved in Q1 or Q2. They even claim that they might just beat estimates by some 3%! In the fine print, they also concede that they might miss estimates by more than 3%.
That’s what we in the biz call “hedging one’s bet.”
Why all the equivocating? Best Buy has been stung on the bottom line by some 18% (Q2 ‘06 vs. Q2 ‘07) because all it can sell are low-margin notebook computers and cheap game cartridges. Nor is this a brand-new trend. In point of fact, last Christmas’ price wars between Best Buy, Circuit City (CC:NYSE) and Wal-Mart (WMT:NYSE) actually ground down cash sales growth into the red.
If this sort of battling continues into this holiday season (with particular attention being paid to the initial Thanksgiving rush), Wall Street will abandon BBY et al with particular fervor.
As per Goldman Sachs’ Matthew Fassler (via Dow Jones Market Watch): “Earnings largely hinge on the future of the TV cycle, which over the past few months has shown marked deceleration.”
Personally, I have checked with the wife, and she informs me that it doesn’t matter how much I would like to watch the local football team bleed in digital wide-screen glory. It just isn’t going to happen for any of us -- not for me, not for the kids, and certainly not for BBY sales or share price.
Chartwise, BBY share price has stretched for $46 and failed three days running. Now it will look for intermediate support at $40.20. A stumble at that critical node would be deadly, as an all-out route down to $33.33 would surely follow. As always, this 27% drop could be converted into triple-digit gains via select put option contracts.
Adam
