While I enjoyed this article, I have to dismiss it as relevant to my views on Costco. The "data points" in the aricle would be more meaningful to me if we were not talking about what is arguably the world's best retailer at this point in time. (At other points in time I have described Walmart as the world's best retailer, an opinion that was valid for about 20 years, and Target as the world's best retailer, an opinion that was valid for 2006.) Costco, like Amazon and Walmart is also one of the major disrupters of retail. I think as a long term, core holding, Costco is pretty hard not to like!
Buy Kohl's: The Price Dip Is The Perfect Opportunity [View article]
While I agree that at this "depressed" level KSS is a buy. A couple of points: Calling Kohl's a "safe" investment after they have just dropped their EPS forecast for the year ending this month by 40 cents on a two dollar base, makes the stock price cheap only if they get their merchandising fixed...fast. I think that they can, but that is what it will take for the stock to run up as opposed to down from this level. And, the merchandising issues are not fixed yet. In addition, using $200 a square foot as a "conservative" estimate of the value of the owned real estate borders on ludicrous. When Lord & Taylor sold stores in the best malls in American a few years ago they got about $60 a square foot. When Macy sold 80 May stores in some great and not so great malls, they got something under $50 a square foot. The cost to repurpose the Kohl's locations would be substantial. Don't depend on real estate values for a floor on a retail stock. They just cannot be realized. And, finally, the likelihood that Kohl's will ever be seen as a growth retailer again is...hmmm...I was going to say zero, but safe to say very low. They used to do 100 stores a year. Now they need three formats, 87k sg ft, 138k sq ft, and 65k sg ft just to get the expansion that they are getting. A ramp up is just not going to happen, and if it did the increased space would be at low ROI. Having said all of that, I agree with the writer, Kohl's is over sold!
Conversion, conversion, conversion: A quick scan of the performance of some major retail websites shows the biting criticism of Best Buy's (BBY +0.5%) online business may be well-deserved. The company only converts 31% of its visitors into a sale compared to the 81% of visitors at Amazon.com and 76% checking in at Apple's site that actually buy something. Comparing the retailer's sales per physical space to brick-and-mortar peers yield similar disappointing results: Best Buy $865 per square foot vs. Costco at $1,031 and GameStop at $1,015. [View news story]
While the author makes some good points here, comparing the sales per square foot at BBY to Costco and GameStop seems totally unfair to me. Costco does huge volumes in bulk food products and in sales to businesses who use Costco as a supplier. By contrast the typical GameStop would not make a good sized closet in a Best Buy store. On the other hand, had the author picked Walmart or Target, or almost any other big box retailer for a sales per square foot comparison to BBY, BBY would have looked darned good.
Costco: Greatly Overvaluved [View article]
Buy Kohl's: The Price Dip Is The Perfect Opportunity [View article]
Conversion, conversion, conversion: A quick scan of the performance of some major retail websites shows the biting criticism of Best Buy's (BBY +0.5%) online business may be well-deserved. The company only converts 31% of its visitors into a sale compared to the 81% of visitors at Amazon.com and 76% checking in at Apple's site that actually buy something. Comparing the retailer's sales per physical space to brick-and-mortar peers yield similar disappointing results: Best Buy $865 per square foot vs. Costco at $1,031 and GameStop at $1,015. [View news story]