The Daily Dose: The Weirdness Continues

 | Feb 28, 2014 | 1:30 PM EST  | Comments
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Stock quotes in this article:

shld

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tgt

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wmt

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jcp

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bby

What a weird week. Actually, what a weird week for trying to analyze retail companies. Take, for instance, these fun facts:

  • Sears Holdings (SHLD) and Kmart had positive same-store sales in February. I have no idea how that happened. For real, generally confused -- as was every contact I touched base with Thursday. Our conclusion is that the results were an anomaly caused by aggressive promotions on inventory Sears was seeking to liquidate. How weird was this news? Target's (TGT) same-store sales were flat in February, while Wal-Mart (WMT) noted only modest improvement from a disappointing holiday quarter.
  • J.C. Penney (JCP) told investors that it could very well be free cash flow positive in 2014. In other words, the company just signaled that it may earn a profit for the upcoming holiday-selling season. Wow, completely the opposite of what any rational investor expected. I believe J.C. Penney has outlined seriously optimistic assumptions underlying its cash flow guidance. Hey, with the stock plunging so, why not go all in, say something aggressive, and pray the favorable results materialize?
  • Best Buy (BBY) believes its holiday 2014 will be borderline amazing amid improved pricing execution and marketing. The change in tone from management on the earnings call was so starkly opposite the January sales pre-announcement that it was creepy. I'm confused regarding the next course of action on the stock, but I plan to spend the weekend figuring it out.

That's enough weirdness for one week, have a great weekend. Bring on the February non-farm payrolls miss.

Three Must-Knows on Sears

CEO Eddie Lampert clearly was on another planet, again, when penning his annual letter to shareholders. Here are three things from inside the financials that I wanted to bring to light:

  1. Capital expenditures fell a disturbing 13% in 2013 vs. 2012, and were at the lowest dollar amount in more than five years. Further, the actual number represented a mere 0.9% of total revenue. Note: a normal percentage for Wal-Mart, Macy's (M), or any retailer seeking to stay relevant is north of 2%. Yep.
  2. Sears and Kmart same-store sales declined 5.1% and 7.8%, respectively, in the fourth quarter. Wal-Mart U.S. sales fell 0.4%. Target's sales declined 2.5% following its major data breach.
  3. In 2013, Sears closed 113 stores to raise cash via liquidation events. Since January 2014, Sears store closures have been sweeping the country unannounced.

One Chart to Ponder This Weekend

As retail stocks go, go, go amid short-covering, look at the lack of participation in some of the logistics plays. Hmm.

Source: Yahoo Finance

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