Singles day is celebrated in China every year on Nov. 11. Originally a student celebration, it has spread to the wider society and it is usually a day that amounts to a buying orgy for the Chinese. However, I believe there are key takeaways beyond this one-day mega event. They include:
- Online sales continue to surge in China, which suggests Wal-Mart (WMT) may be tossing money away by opening some 100 stores in the country by the end of 2015. Evidence of this has already appeared: the company announced earlier in the year that it was closing stores in China. I think the popularity of singles day sheds light on how U.S.-based retailers didn't fully understand Chinese consumers when they went berserk with new store openings starting a few years back.
- As an investor, you want to dig beneath the buzzy headlines and think: what investments stand to benefit from a growing trend (Singles Day) that is part of an even larger trend in China (greater online consumption)? The names with that global appeal in China include Nike (NKE) -- China is big business for Nike, and the company benefits from its sports star marketing -- Starbucks (SBUX) -- the company is making a big push in China -- V.F. Corp. (VFC) -- the Timberland and North Face brands continue to do well in China, and Ralph Lauren (RL), which plans to open a giant 20,000 square foot flagship store in China.
- Sidenote: same-day delivery in China is exploding (Wal-Mart China has a same-day delivery service), and I believe this is a service Starbucks will launch in the country in 2016.
Uproar at the Ports
I think you have to split this interesting issue (which most are not following, but should be) up into two different angles:
Delays at the ports during the holidays are the last thing an investor in a retail company wants to hear. It immediately means costs of doing business are going higher just as the mall remains hyper promotional and companies are investing all of their pennies in tech infrastructure. Further, if a retailer disappoints the consumer during the holidays, it risks losing their business at key times (back to school, Easter) in 2015. The read: here come the earnings warnings potentially from many, as in retail goods are turned quickly especially as retailers have sought to keep inventory levels lean due to weak sales.
Railroads could also be hurt as shipments are bypassed for airfreight. Railroad stocks are currently "priced for perfection."
Crazy, but the one retailer who may benefit from this is Wal-Mart. It has brought in its holiday merchandise in key departments early, somewhat ensuring it will be well-stocked for most of the holiday season.
If you have a wish list already made, it may be worth it to buy the product now before the Black Friday sales deplete inventories at retailers. It's okay to pay full price.
GM Ignition Issues
Of course General Motors (GM) knew about the faulty ignition switches and tried to cover it up; the savvy investor would have realized from the day this ignition news broke that this uber large company couldn't possibly know how deep the bad news ran, who was covering up what, etc. I have no reason to believe the bad news is poised to stop. The stock's price in the past month suggests more could be on the way in the next six months.
However, what I am concerned about now is not the impact on new GM car and truck sales of this long-running news, but how it impacts the used car market. Weak used car prices (born from people being scared to buy the autos amid the lack of brand trust) for GM products could cause the company to price its new cars more competitively in 2015, pressuring the company's financials further at a time Ford's (F) new aluminum truck is being released and Tesla (TSLA) is leading the electric car movement. Moreover, I am also concerned about how the news ultimately impacts GM's research and development process for future models.
Pay attention to shares of AutoNation (AN).
Watchmaker Fossil's (FOSL) Earnings
Two reasons why I'll pay attention to this company's results today:
Fossil owns the watch cases of Macy's (M), J.C. Penney (JCP), etc. and I want to hear if the company's sales have been disappointing in light of warnings in recent weeks from J.C. Penney, Kohl's (KSS), and Wal-Mart. Fossil's earnings could give a trader key insight into Macy's earnings, which are reported on Wednesday, Nov. 12 pre-market.
I am eager to hear the company's comments on all of the new watch-based wearable technologies, specifically from Apple (AAPL) and its iWatch, as it was dubbed by the market. It will be interesting to see how a pure watchmaker like Fossil views the disruptive iWatch. Does it seek partnerships with tech companies? Does it plan its inventory more cautiously in 2015 because of the iWatch and other introductions?