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alstry (35.16)

A Costco Analysis-Especially for DemonDoug

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June 05, 2008 – Comments (6)

Demon,

As you know, I am the SELF PROCLAIMED bad boy of CAPS.  In addition I fantasize myself as the watchdog of facts.  Whenever I post something factually wrong or even creating an inference of improper interpretation, not only do I encourage correction I applaud it.

DD, I know you think you are more bearish than I am, but I assure you it ain't even close.  But debating who is more bearish than the other is like two canines trying to prove who is more dog.  It really doesn't matter in the end.

To be fair, Costco is my favorite store and it is where I and my family do much of our shopping.  I am unware of a better retailer anywhere in the world.

You posted:  Costco was up a whopping 9% same store sales.  That is absolutely huge for a company that size. ...there are people like me who are stickler for facts and fundamentals.

I appoligize for not making the following point clear in my earlier post...   My bearishness is primarily focused on America so when I do a blog, it generally focuses on the American operations of the companies I reference.

So here is an excerpt directly from the Costco release and not something tainted by the mainstream press or Wall Street which may have its own motivations for printing headlines or writing stories:

The U.S. comparable sales figure includes, among other things, the effect of gasoline price inflation, with the average sales price per gallon of gasoline up 19% for the four-week month of May, as compared to the year-earlier May. Excluding gasoline price inflation, U.S. comparable sales would have been up 5%. In addition, foreign exchange rates, primarily in Canada, positively impacted international comparable sales results.

I hope this clarifies my basis for my 5% number on Costco.  As an avid shopper of Costco, I know a big percentage of their sales comes from tires and groceries.....tires being a petroleum based product whose price has risen significantly and groceries....well we all know about that.....the 5% SSS number just is not that impressive factoring inflation and customer canibalization.  Sorry, that is just my point of view and a similar conclusion can be drawn for WalMart for a different type of customer.

Now as far as this comment from you:

"And as far as most of the other retailers their sales are down 5%-10%......and that is AFTER heavy discounting to make their numbers."

because this is a patently false statement.  You know I love you alstry, and in fact, in general I might argue I am more bearish than you, but please, if you make statements that are just flat-out incorrect, the authority of your statements diminishes greatly, at least in my eyes.

 Gap's same-store sales dropped 14%

J.C. Penney reported comparable-store sales decreased 4.4%

Kohl's posted 7.2% decline in May

American Eagle posted a 9% drop

Limited reported comps were 6% below the same month in 2007

 

Just based on my reading the headlines this morning, it seems like most retailers had negative SSS.  5-10% seemed like a good ballpark on a brand name weighting.  Remember, in May, retailers were discounting like crazy.  I know this because I am connected in the industry.  So a neg comp, or even a slightly positive comp factoring inflation, discounting, and stimulous checks sucks on a good day and blows in reality.

I hope this clarifies my previous post for you a bit better.  And as far as who is the bigger bear....just keep reading.

PS Thanks to you and anchak for the input.

6 Comments – Post Your Own

#1) On June 05, 2008 at 3:24 PM, bobbyj0708 (< 20) wrote:

23 retailers reported may sales this morning.  13 exceeded and 3 met expectations, while 7 came in below expectations.

 I think the key word is "expectations". I can't find them. What were they?

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#2) On June 05, 2008 at 3:31 PM, alstry (35.16) wrote:

When I went to school, when I brought my report card home and there was all A's and a B.....my father would ask why did I get the B.

Quite frankly, I was a lazy student but getting good grades came pretty easy.   As a result, my father set one set of expectations on me.  For my brother, who was an exceptional athlete, a different set of expectations were set.

In both cases the expectations were set high.  As far as Wall Street goes.....expectations are set to manipulate price movements.  Not to judge objective performance.

If you were expected to get a D- in a class and you got a C.....you blew expectations away.  In my universe, a B is about as low as you want to go absent some special circumstances.

As far as Wall Street and its games....that is what we are playing here and that is why I red thumbed both COST and WMT today.....because expectations are very high right now.....higher than I think even the best can achieve in the current environment.

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#3) On June 05, 2008 at 3:55 PM, alstry (35.16) wrote:

From MarketWatch:

 

Almost 60% of the retailers tracked beat estimates, with 10% posting in-line figures and the rest missing expectations."Although most retailers beat estimates, it is evident that consumers are holding back on spending due to macroeconomic issues, especially the rising unemployment rate and the deteriorating credit markets," Thomson said. "Consequently, consumers are trading down in spending and shopping for bargains and basic necessities."

 

At Dillard's May same-store sales fell 7%

Saks Inc. said same-store sales fell 8.7 percent

Target Corp.said same-store sales fell 0.7 percent(Target now sells material amount of groceries)

Clearly, Nordstrom was an exception up over 10%.....now the question is at what cost to margin?

Further, HomeDepot, Lowes, and Macy's don't report monthly SSS....guess why?

 

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#4) On June 05, 2008 at 7:38 PM, nuf2bdangrus (< 20) wrote:

Wall street is flush with taxpayers cash in the bid to keep assets priced high so the wealth effect keeps us spending....as incomes can't keep up with debt, the Feds need housing and stocks to be high, and housing is falling despite their best efforts.    In the end, only organic income growth can creat wealth, the rest is illusory.  I have made nothing on my bearish bets as rallies have squeezed me.  THis is the war of a generation, the govt's attempt to declare the economic cycle null and void.  At some point, it will fail.  The question is when. 

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#5) On June 05, 2008 at 7:43 PM, DemonDoug (78.51) wrote:

alstry, the issue i was taking wasn't the percentage decline of each store, it was the fact that you said that most of the other retailers, most meaning a majority, more than half, and it was less than a third of the retailers that reported negative SSS.

You corrected this with your last comment.

We'll have to compare bearishness someday. 2020 is my target date for normalizing of the RE market, with a possibility of this extending out to 2030 (25 years to revert to the mean). I'm going to write a new housing blog post, probably tonight, revisiting the macro factors for a prolonged housing downturn.

I'm not in the tin-foil hat invest in guns and ammo crowd, if you are there then it is likely you are indeed more bearish than me.

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#6) On June 05, 2008 at 8:05 PM, alstry (35.16) wrote:

Demon,

If you would like to make a bet, as you know I am a betting man, I am willing to bet you that if you take ALL of the retailers that reported today, the MAJORITY, over 50%, reported negative same store sales comps.

If you simply take the apparel and department stores, it was well over 50%.

NEW YORK (AP) -- Summary of May same-store sales results for apparel category store chains, with percentage increase or decrease over the same month last year.

Abercrombie & Fitch Co. -1 pct

Aeropostale Inc. 6 pct

American Eagle Outfitters Inc. -9 pct

Cache Inc. 5 pct

Cato Corp. 2 pct

The Children's Place Retail Stores Inc. 10 pct

Gap Inc. -14 pct

Hot Topic Inc. -0.2 pct

Limited Brands Inc. -6 pct

Mothers Work Inc. 4.3 pct

Pacific Sunwear of California Inc. -3 pct

Wet Seal Inc. -2 pct

Stein Mart Inc. -12.4 pct

Department chain sales results for May
Thursday June 5, 1:18 pm ET

NEW YORK (AP) -- Summary of May same-store sales results for department category store chains, with percentage increase or decrease over the same month last year.

Dillard's Inc. -7 pct

J.C. Penney Co. -4.4 pct

Kohl's Corp. -7.2 pct

Saks Inc. -8.7 pct

Stage Stores Inc. 0.1 pct

Then you had JWN, WMT, and COST on the plus side and TGT on the negative.

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