Back in the Holiday Spirit

Clearly, sales are strong. But, does Joel Bines at Alix Partners LLP really believe that this year’s deep discounts were “already baked in the merchandising plan?” The fact is that most retailers warned investors in November 2010 about lower merchandise margins in Q4 2010 versus LY. So, while deep discounts were “baked in” 2 months ago, the level of promotional activity certainly was not planned in March 2010 when product orders were originally placed. Mr. Bines seemingly does not understand that merchants don’t plan for lower merchandise margins when placing product orders 9 months in advance.

Raw Material Costs Taking a Toll

We’re not sure that anyone knows how much higher raw material costs will be able to be passed along to the consumer. That said, the promotional environment is not suggestive that consumers will stomach the price increases, especially in the low-to-mid price point spectrum.

Wal-Mart Adopts New Strategy in Quest for NYC Store

Why did it take this long for WMT management to determine it needed a smaller box size in urban locations? Absolutely unforgiveable.

Online Holiday Spending Rises 12.6% to Over $30B

We disagree with ComScore Chairman Gian Fulgoni. We believe that online spending growth has less to do with macroeconomic trends and more to do with the consumer’s willingness and comfort associated with online purchasing.

Retailers Swipe at Credit-Card Plan

Ok, some of the complaints from the retailers makes sense. But, we got a chuckle when reading the quote attributed to Dwaine Kimmet, HD’s treasurer, in his letter to the Fed. He pulled the “natural disaster” card.

Retailers Eye Openings Again

Don’t believe this headline. Certainly, there are a handful of retailers that are growing their store count. But there are many more that are shutting stores and the online shopping phenomenon argues against growing the store count.

Rising Costs Challenge Execs

Footwear costs are rising. Can these increased costs be passed along to the consumer?

Phone-Wielding Shoppers Strike Fear Into Retailers

It’s being called the “New Era of Transparency.” Big picture, merchandise margins will continue to be under pressure as consumers will be able to comparison shop on their mobile phones.

Uncertainty Looms Following Holidays

Richard Jaffe at Stifel Nicolaus suggests that “more was planned to be promotionally sold” this holiday season than ever before and that the economy “didn’t start getting better” until after many stores made their buys.

Not true. In March 2010, the macroeconomic environment was looking much stronger than July/August 2010. But, unfortunately, retailers were placing holiday inventory buys in March 2010. The orders placed for the holiday season this year were placed based upon an expectation for a much faster macroeconomic recovery.

The storyline for Holiday 2010 is that retailers had materially higher levels of inventory relative to demand. Therefore, merchandise margins will suffer (many large retailers have already warned investors).

SEC Proposes ‘Conflict Mineral’ Report

Get ready for an additional disclosure in 10-Ks. The Dodd-Frank Financial Reform Act passed in July 2010 requires companies to report whether its goods contain minerals from war-torn central Africa.

Supreme Court Will Consider Wal-Mart Challenge to Bias Suit

Many corporations are supporting Wal-Mart in this case as they believe it exposes companies to large-scale liability. Ruling expected by July 2011.

Ackman Offers to Finance Borders Buyout of Barnes & Noble

First, JCP. Now BKS.

What’s Next for Mindy Meads?

The biggest career mistake Ms. Meads could make is to surface at WTSLA, CACH, CBK, or CWTR (each mentioned in the article). Today, she is as ‘hot’ as Cliff Lee. You won’t see Cliff Lee sign with the Pittsburgh Pirates. So, why would you expect Ms. Meads to end up at WTSLA?

J. Crew Acquisition Details Emerge in SEC Filing

Mr. Drexler suggests he’s not working for anyone else! End of story.

TJX to Cut 4,400 Jobs

What’s interesting is that the AJ Wright chain enjoyed a 1.6% EBIT margin in FY 2009. Think of all the chains that are still operating with negative EBIT margins and have equity market value (e.g. CACH, CPWM, CWTR, HOTT, NWY, PSUN). In other words, if this chain could not be sold, what does that say about the negative EBIT margin companies that remain public today?

Black Friday Sales Rise, But Only Slightly

Does anyone really believe the ShopperTrak data?

Strong Black Friday Fuels Upbeat Outlook

This is always a great review of Black Friday that is a helpful read prior to sales release Thursday. It includes quotes from the management teams of the major department stores.

Cool Temperatures Boost Outerwear Sales

The coldest November since 2002 helped. Despite the heavy promotional activity, this helps explain why a few retailers reported improvements in average unit retail (AUR) in November 2010 versus what the same companies disclosed in October 2010.

Builders Mark Time on Outlet Centers

There are 1,400 traditional shopping malls. There are only 214 traditional outlet malls. As more retailers open outlet stores, construction and conversion of outlet centers is on fire.

J. Crew Deal Faces Legal Challenges

JCG fits the mold of the types of deals we’re seeing today… that is, sell the company at its profitability ceiling just before a major stumble (see ex-GYMB). The interesting part is that if the company had announced its Q3 2010 results prior to the deal announcement, the stock may have tanked to below $30. In our view, Mickey knew what he was doing here.