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Posted
Apr 14 2008, 12:19 PM
by
Kim Peterson
Rating:
Does one loser plus one loser equal a winner? Not in the case of Blockbuster, whose offer to buy Circuit City is being met today with near-universal derision and head-scratching. The video chain, which has been in a losing battle with Netflix, has offered as much as $1.3 billion for Circuit City. That's more than a 50% premium to Circuit City's closing stock price on Friday. Blockbuster wants to combine the companies into a chain that would sell portable devices, DVDs and other content. Circuit City investors are understandably thrilled by the potential marriage. Shares of the company soared 28% today to $4.98. The electronics chain has been exploring sale possibilities, and this kind of premium is attractive. Blockbuster investors, on the other hand, are not happy: shares dropped nearly 11% today to $2.79.
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Posted
Apr 09 2008, 11:08 AM
by
Kim Peterson
Rating:
Walk into the Circuit City in my town, and you'll suddenly get a strange sensation. Look around...you're the only person there. Wait, someone must work here. Hello? Anyone? Then head over to Best Buy, which is packed with customers and ringing up sales.
Why is Circuit City struggling while Best Buy shines? There are many reasons: prices, marketing and sales strategy top the list. Look at the stock prices of the two: Circuit City shares have fallen from nearly $19 a year ago to $4.30 today, while Best Buy shares have stayed in the $40 to $50 range all year.
Circuit City might see some big changes soon. BusinessWeek reports that the retailer may have hired Goldman Sachs to look into sale possibilities. This comes after the company's turnaround plan has failed. Analysts say one of the worst decisions executives made was to fire 3,400 of the most experienced workers and replace them with lower-paid ones, according to Business Week. Customer service went out the window.
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Posted
Mar 20 2008, 12:05 PM
by
Kim Peterson
Rating:
I've been thinking about CEO apologies today after reading the Jeff Bezos note plastered on Amazon's front page. Bezos' contrition stems from the fact that the company sold out of the new Kindle electronic book reader in 5.5 hours, and it has been scrambling to increase production ever since. Some customers have waited six weeks to get one. Soon, Bezos said, Amazon will start shipping Kindles to people the same day they order them. "We had high hopes for Kindle before its launch," Bezos wrote, "but we didn't expect the demand that actually materialized." This wasn't exactly an apology -- Bezos never said he was sorry -- but it did have a "we screwed up" tone. And yet it smacked of product promotion -- it was another opportunity to advertise the Kindle to everyone who visits Amazon today. Amazon shares rose more than 4% today to $73.25.
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Posted
Mar 07 2008, 11:59 AM
by
Anthony Mirhaydari
Rating:
Best Buy and Circuit City are reeling this week from the loss of their edge over discounters in the minds of high-definition television buyers -- just as total industry sales are beginning to slow. Yesterday's retail numbers showed that more consumers are trading down to price-focused shops for entertainment products, eschewing the better service and selection offered at specialty stores. Wal-Mart, the king of discounters, yesterday reported "extremely strong sales" of flat-panel TVs and home entertainment furniture.
This is a remarkable turn of events for specialty retailers that once had the high end of the business locked up. Vendors like Sony and Panasonic used to sell exclusively through the leading specialty stores to protect their brand image and leverage the service levels these outlets offer. But now, as the big electronics makers are fighting for their own lives, squeezed by low-cost competitors and a slowing consumer, they’ve become a lot less picky about where to sell their wares. At the end of the day, it's about the sales targets.
This backs up the findings of a recent survey by AlixPartners, a consultancy, which showed that U.S. consumers at all levels now rank "low prices as the most important determinant of what and where they buy, eclipsing product quality, customer service, the shopping experience and ease of shopping." In the words of AlixPartners managing director Fred Crawford: "It's a whole new ballgame."
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Posted
Mar 06 2008, 01:39 PM
by
Robert Walberg
Rating:
Not skyrocketing energy prices, not the rising foreclosure rate, not even the slowing U.S. economy will stop GameStop from posting monster sales and earnings gains when the company reports its fiscal fourth quarter earnings in less than two weeks.
Bolstered by strong demand for video game hardware systems such as the Wii and Xbox 360, and continued strength in software sales, the world's leading video game retailer is expected to deliver Q4 earnings of $1.12 per share on revenue of $2.9 billion, -- well above last year's results of 82 cents and $2.3 billion.
Normally, a stock would rally into such news. But these aren't normal times. GameStop is down 32% from its December 2007 high, as investors flee any and all stocks tied to the consumer. However, unless you're a gamer or are related to one, you might not understand that GameStop actually stands to benefit competitively from a downturn. Unlike Target, Best Buy or Wal-Mart, GameStop sells used games and game consoles. In fact, sales of pre-owned merchandise now represent about 25% of total sales.
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Posted
Feb 27 2008, 06:53 AM
by
Kim Peterson
Rating:
Apple's iTunes store has surpassed Best Buy to become the #2 music retailer in the country, second only to Wal-Mart in sales. And an analyst from the NPD Group, which tracks these sorts of things, said that Apple is on track to catch Wal-Mart this year. Apple shares dipped less than a percentage point yesterday to close at $119.15. Best Buy shares rose 3% to $46.50, and Wal-Mart shares rose 2% to $51.40.
This news says much about the way we consume music. NPD notes that 1 million people stopped buying CDs last year, a trend most apparent in young people. In 2007, 48% of teens didn't buy a single CD -- up from 38% in 2006. So retailers like Wal-Mart, Best Buy and Target -- who mainly sell physical CDs -- are going to see music sales slide. But what does the news say about Apple? Is the rise to No. 2 a result of its own sales savvy, or is iTunes the lucky beneficiary of the CD's decline? A closer look at the numbers sheds a little more light.
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Posted
Jan 30 2008, 12:32 PM
by
Kim Peterson
Rating:
The shopping mall is no place for electronics sales, it seems. Unless you're Apple. First Palm shuts down its retail locations. Now Dell decides the mall is no place to be either. The computer maker is closing all 140 of its kiosks. Too bad for the Dell kiosk employees. The guys at the mall near me usually seemed bored, but at least they didn't harass me like the cell phone hawkers. Did anyone buy a Dell computer as a result of those kiosks? I'm wondering if they truly were worthless, as CrunchGear states, or if they served some tenuous sales purpose.
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Posted
Jan 14 2008, 11:16 AM
by
Robert Walberg
Rating:
The "softer side of Sears" no longer refers to its apparel merchandise, but to its sales and earnings history.
Citing difficult economic conditions and growing competition, the company warned that fourth-quarter sales and earnings would fall well shy of Wall Street estimates. Management now expects quarterly earnings of between $2.59 to $3.48 per share, a whopping 20% to 40% below the Street's consensus estimate. The stock responded by falling to its lowest level in three years.
It's a bit surprising to me that so many investors were surprised by the company's dismal quarter -- especially given that Sears issued an even bigger warning last quarter. The company has also had a history of underperforming expectations over the past several years. Let's face it, the Lampert experiment has been a total bust. You can prop up numbers only so long by cutting costs and repurchasing shares -- at some point you have to improve the core business and Lampert, chairman and architect of the merger with Kmart, never had the retailing experience necessary to get the job done.
The idea of merging two struggling retailers in hopes of creating a thriving one was doomed from the start -- especially since management was more concerned with pleasing Wall Street analysts than store customers. The folks on Wall Street might not be the brightest bunch in the world, but even they are beginning to realize that Lampert's financial razzle dazzle hasn't done anything to make Sears or Kmart more relevant to shoppers.
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Posted
Dec 18 2007, 08:52 AM
by
Robert Walberg
Rating:
Remember when it was cool to own/buy a Dell computer? Not that long ago it was Dell, not Apple, that had the laid back young kid starring in commercials that resonated with consumers. "Dude, it's a Dell," was the stuff of genius. Dell's were cool, they were cheap and they were everywhere.
Yet in little less than five years Dell has gone from cool to ice cold. Its share of the PC market has eroded due to misguided retail practices, poor customer service and outdated design. The company has also lost its price advantage. Despite the cheap prices you see on the company's web site, or in the flyers that arrive in the mail, once you configure the computer to match even the most basic of needs, the price ends up being as high or higher as PCs from Toshiba, Hewlett Packard and Acer.
Quite simply there's nothing that sets the company apart anymore -- at least nothing positive. Its abysmal technical service group certainly set it apart, as waiting on the Dell help desk was an exercise bordering on cruelty. To its credit, Dell's management team has begun to address this issue by adding staff, but once you get a bad reputation it can be very hard to change consumer perceptions. Dell has a lot of making up to do and some blunt talk from its back-in-the-saddle CEO, Michael Dell, just might help remake its image. Let's face it, Apple was left for dead a few years back and look at what the return of Steve Jobs did for that company.
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Posted
Nov 15 2007, 08:52 AM
by
Robert Walberg
Rating:
Within the past week Wal-Mart and Corning delivered positive earnings surprises due in part to the strength of large, flat-panel televisions. Investors responded by driving the share price of both stocks smartly higher. If you missed both of those moves, you might want to consider jumping into Best Buy ahead of that company's earnings report due in mid-December.
No company is better positioned to exploit the growing demand for large television sets this holiday season than the country's top electronics retailer. Price competition might keep margins from expanding greatly, but robust sales growth in the television/home theater area should result in some very favorable bottom-line comparisons. Best Buy is projected to earn 40 cents a share in its fiscal third quarter, up an impressive 30% from last year.
But Best Buy's results won't be driven only by big TV sets. Despite the difficult economic conditions, strong demand for other consumer electronic items such as gaming consoles, digital music players, high-end cell phones, portable navigational devices and laptop computers should make Best Buy a top holiday destination for shoppers. Most of these items are priced to move and even though consumers are feeling the pinch from higher energy prices and declining home values, crowded Best Buy stores suggest that, yes Virginia, there is a Santa Claus -- and he will be filling his sleigh with consumer electronic goodies again this holiday season.
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