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More Companies Benefitting from Bankruptcies

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January 29, 2009 – Comments (1) | RELATED TICKERS: BBY , FDX , BBBY

A few blog posts ago, I posted about companies that should make money consulting on bankruptcies.  Specifically the best bet there is with EPIQ, the company that won the huge Lehman bankruptcy work.  Check out my blog post on consultants here.   But there are some other companies benefitting from all these bankruptcies - it's those retailers - the last standing.  In women's clothing, teen retail, booksellers and some others, we're still waiting for some to fold.  But in appliances, bedding, package delivery and now flooring, we've seen companies lose their biggest competitors which will position them well for the future.  Maybe now is bad, maybe the next few months are bad, but the little business there is in their markets will go to these 'last men standing'.  And when things turn around they'll really benefit.  

 

The ones you know - Best Buy (BBY) and Bed Bath and Beyond (BBBY)

 BBY and BBBY have already made some substantial moves off their lows.  Best Buy lost Circuit City as a competitor, and Bed Bath and Beyond lost Linens 'n Things.  Both of these retailers' stock prices continued to sell down after it was known their competitors were bankrupt, so we know we right now isn't necessarily the bottom for these other companies.  But it's good to know who they are right?  Keep your eyes and ears open for the following companies, we should start hearing some positive news.  Losing a competitor means not having to spend as much on marketing.

 

UPS (UPS) and FedEx (FDX)

DHL, the ones with the pretty yellow trucks, have bowed to big brown (UPS) and the purple and orange (FDX) and have ceased operations in the US except for international shipping.  I thought it might take awhile for companies to move from DHL to UPS or FDX, but apparently big business doesn't want to worry about their packages absolutely positively getting their overnight.  A worker at the Phoenix UPS station (just outside Phoenix in Mesa) told me they got an immediate jump in business with DHL's announcement.  UPS and FDX have sold off with the global economic slowdown, and both can sometimes trade counter to the price of oil (they go up when oil goes down); but this playing field just got smaller.  Keep your eye on these two shippers.

 

Lumber Liquidators (LL)

LL is benefitting from the failure of some big and small competitors.  On the large side, Home Depot recently abandoned their Expo effort.  Expo never had more than about 20 stores, but now they're all being shut down.  Expo carried more than just flooring, but it's a big name going down.  Having a greater effect on LL will be the shuttering of many smaller competitors you may or may not know.  The latest victim in the housing crisis is the death of iFloor.  They competed on the web and in a few retail fronts directly with LL for lowpriced wood flooring.  Just do a search for "discount wood flooring" and LL and iFloor will be a couple of your top results.   My local LL staff have reported iFloor employees coming in looking for work.  With LL's strong relationship with HGTV (their products are regularly used in all those remodel shows), they continue to get great exposure while getting through these tough times.

 

Conclusion

These bankruptcies are why the surviving retailers often have such huge leaps in share price coming out of a recession.  They've made their own moves to get stronger, leaner, and have better balance sheets.  And then they've gained a larger piece of the pie and a lower cost of marketing spend through the dieing off of competitors.  I'm sure Barnes & Noble wishes Borders would just give up (or vice versa), but for now they're splitting the same market, having to compete for those very few dollars consumers are willing to give up.  I have no idea if today is a great day to buy or if we're going to see a greater selloff in these names - but keep an eye on them.  The future looks a heck of a lot easier for BBY, BBBY, FDX, UPS, and LL.

 

 

1 Comments – Post Your Own

#1) On January 29, 2009 at 2:30 PM, motleyanimal (92.22) wrote:

Nice work. I like your thinking on this topic.

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