phil'spal

Best Buy Bounces on Circuit City Closure

constructe:

as right as you are about management greed, i wish you were right about the 50% margins! big tickets are nowhere near that, and the terms arent nearly as forgiving as that. suppliers will eat you alive if you let them. it's a tough racket, and dummies don't last forever. (refer to headline. i rest my case)

Circuit City: Closing Time

bill:

looks like in the short term, anyway, BBY (up 8% y'day) is the biggest net beneficiary of CCTY's fall (other than lawyers and liquidators). here's hoping they dont get arrogant or complacent. it's a great opportunity for them to cultivate a whole lot more market share. there's a definite need for a specialist electronics outlet, the kind that dept stores just cannot provide. if they make sure that their training programs are a major priority and they can offer their customers a heightened sense of confidence in shopping there, i think they'll be able to create an incredible brand with a truly unique presence in the market. when the economy turns around, BBY should be able to offer what no other electronics outlet can and in so doing, will surely make some big coin for its investors.

Media Companies to Fed: Tarp Me!

i'll have to second bill's outlook. CC was in bad shape going into BK. the DIP funding is just a stalling tactic. sure, they'll close some stores, fire some people, but the money pit will continue to do it's job of swallowing heideous amounts of cash. the consumer electronics industry is bracing for the worst year in memory. CC suffered from lack of traffic before and there's no reason to think that anything will change. what catalyst am i not seeing that's going to make everything all better in the new year? is the economy and the customer sentiment and the management style and the competition's execution going to all at once change in their favor? BBY and WMT are guiding down, but their customers arent worried about them still being around after new year. CC is getting inventory shipments now. the bugaboo they're faced with is that they have to sell it. at a profit at that. the bigger players are expecting to fight the mother of all price wars to get their share, so profit margin will be the main casualty. CC can scarcely afford much if any margin contraction. they are not equipped to battle in that arena.

sorry, but WMT and BBY beat them. they wont emerge from bankruptcy. when they've used up the DIP bucks, the courts will summon CC's accountants to ask one more question: "if you have 11 chapters and we take away 4 of them, where does that leave you?"

Red Friday: Coming to a Mall Near You

not every consumer is cash strapped. a lot of them however are in conservation and survival mode, bracing themselves for the possibility of things getting even worse. they're being a lot more careful with their cash than they have been in the past. retailers are going to have to offer more value for fewer dollars to turn shoppers into buyers. given that situation, it's going to be a buyer's market for the holiday season, particularly in the discretionary product. if a retailer isnt willing to offer the deals, he'll be giving up the sales. retailers wont want to be stuck with a lot of inventory and payables in the new year. some may panic. some may slash just to keep the cash flow going. we could be in for some crazy price wars in some retail sectors. stronger players will survive, but the weak sisters who cant afford the profit compression could be shaken out.