spinetta

Winn Dixie: Why the Market Is Wrong Again

Let's apply Mr. Krieger's extensive financial observations where the proverbial rubber meets the road: On Winn-Dixie's retail floor.

The stores' low valuation may be entirely appropriate. Many of WD's stores are old to the point of obsolescence. A typical WD lacks nearly all of the features that make a modern grocery store efficient.

Compare a typical Safeway Lifestyle store to a typical Winn-Dixie, and WD comes up short on every major. Safeway features much more modern construction and infrastructure. HVAC systems, refrigeration systems (central glycol tank in Safeway, lotsa individual compressors at WD), lighting, and information systems at Safeway create more efficient stores that are more comfortable for shoppers and easier to operate for managers and staff.

WD spends an inordinate amount per square foot on remodels because their buildings are old and their remodeling process is inefficient. Lack of uniformity among stores/buildings creates higher remodeling costs as well. Furthermore, WD postponed remodels for years. This mindset created additional wear on buildings and resulted in slapdash repairs that now must be undone during major remodels.

The market may well value each WD store at a paltry $1.2 million because that's the value of a WD in relation to the value of a competitor's store. An individual WD may be worth more than $1.2 million, but it's really only worth a fraction of a Safeway store or a modern Kroger store.

WD may look to remodel its way into a takeover/merger. Methinks they're putting some makeup on the pig before walking her to market.

WD's inefficient remodel process will be evident to the majors, and they'll wait for the company to flop before making a move. Savvy retailers need something more than a fresh coat of paint before they'll make an acquisition. WD's best negotiating point with a suitor may be its low price per store.

Cramer's Mad Money - The Oddest Retail Phenomenon in 30 Years (10/7/09)

The key word is "value".

Family Dollar and Nordstrom consistently deliver value, i.e. merchandise and a shopping experience that coexist in harmony with price.

Both chains have maintained (and DELIVERED) a consistent image for decades.

In times of turmoil, the customer demands consistency and value. Money is precious now, and customers do not want to be surprised.

Family Dollar delivers clean stores and decent staples on a budget. Many of its competitors deliver filthy stores and abysmal quality.

Nordstrom delivers excellent service and house label garments that, for just a few dollars more than JCPenney or Men's Warehouse, far exceed the quality of similarly tiered brands offered by its competitors. Customers (er, guests, in Nordstrom lexicon) can easily spend themselves into debt buying couture and accessories, but that's not why Nordstrom succeeds in 2009. There's no better value, in my opinion, than JWN's house label dress shirts, slacks, trousers, and socks.

Say it with me, Cramer: Value.

20 Companies Most Likely to Go Bankrupt in Next Year

Merely a list.

No supporting evidence.

No explanation of the method(s) used to compile the list.

So, how would this list fare if the author had submitted it as coursework at any reputable business school?

Methinks that enough coursework such as this would earn its author a speedy departure from an impacted business school (All reputable business programs are impacted due to scarcity.), and the author would soon change his major to communications.

Raise your standards, oh readers and editors of Seeking Alpha. Hold your writers accountable for their claims.

Cramer's Stop Trading! The Best-Acting Retailer Out There (6/1/09)

Sears? I'm no fan of Cramer, but I challenge The Almighty One or anybody else to cite five reasons why Sears is "one of the best acting retailers out there." Sears continues to sputter along on momentum from the days when it was America's largest retailer and one out of every twenty four Americans had worked for Sears at some point. Their stores, which actually enjoyed a merchandising renaissance TWENTY YEARS AGO are poorly merchandised, dark, and chock ablock with empty runs of shelves. Nothing about Sears or Kmart indicates that either brand has identified its core customers. The merger of the two brands never went beyond the board room or the balance sheet, and the much ballyhooed real estate play within the merger never bore fruit. So, Jimmy, where's the friggin' beef? Would somebody other than clown prince Jon Stewart please challenge this guy?!?

Why Is Pepsico Buying Its Bottlers?

Two thoughts:

1. Payola g'waan keep flowing. Twenty years as an independent beverage distributor taught me that shelf space and display space is purchased most efficiently in corporate suites, not in retail aisles. Independent distributors can purchase (or earn - Ha!) shelf space and display space from independent retailers, but there are only so many successful indies remaining. The big money and big market share gains come from purchasing shelf space and display space en masse from chain stores. Once PepsiCo completes the purchase of its distributors, they can speak to Safeway, Kroger, WalMart, and the rest as equals. Payola isn't going away anytime soon. Payola will become more efficient and much more centralized.

2. PepsiCo will introduce its own niche products through its own dsd (direct store delivery) channel and simultaneously create a formidable barrier to entry for smaller producers who do not own (or have access to) an independent distributor. Beverage distribution has become more and more centralized over the past fifteen years, and PepsiCo's acquisition of bottlers is a defensive move against market penetration by upstarts. Does anybody remember Snapple's entry into the market? Such a debut becomes more challenging when there are fewer large, independent distributors.

The article is excellent, and the author is quite insightful. Kudos!

Why Isn't McDonald's Targeting the Fish Crowd During Lent?

Here's a better question to ponder: What percentage of potential and actual Filet-o-Fish (tm) customers possess a degree of involvement with the product that they would spend time locating and browsing filetofish.com? In short, who really gives a damn and wants to spend time exploring a website that promotes an inexpensive fast food entree?

Catholics are easily targeted through church bulletins, diocesan newspapers, and events at their individual parishes. When I was an altar boy lo those many years ago, McDonald's franchisees would donate Filet o'Fish gift certificates that were given out to kids in Catechism.

When you can easily locate your demographic, you are better served by directly promoting your product as opposed to promoting your website. Fast food rates low on studies of consumer involvement, and websites best serve products that rank high on studies of consumer involvement.

KMart's New Drive Thru Concept Is Sensible

Does anybody remember Best Products? Now, imagine the line of people at the will call window transformed into a line of cars snaking through a former KMart Garden Center. Added bonus: You're in that line, in Illinois, during the winter! Oh, joy! Driving to a store and waiting in a line of cars sure beats paying UPS a few bucks to deliver the goods that you bought online. Earth to Sullivan: Those who don't want to visit stores DO NOT WANT TO VISIT STORES. Visiting the exterior of a store such as the KMart prototype provides most of the hassle, little of the satisfaction, and none of the impulse purchases (important to every retailer) included with a visit to the interior of a store. Earth to KMart/Sears: Your time is up.

Cramer's Stop Trading! AT&T a Market Stalwart (11/12/08)

Does Cramer realize that Nordstrom overhauled its return policies a few years ago? JWN no longer accepts returns unconditionally. JWN's return policies, admittedly more forgiving than most retailers', now utilize the company's excellent information systems to confirm a customer's tale of woe prior to accepting a return. Customers who return goods on a serial basis are tracked and subjected to deeper scrutiny.

Some glorious day will dawn, and CNBC will realize that Cramer's temperment and knowledge base are better suited to animation. When Jimmy Boy finally goes in for electroshock treatment, look for him to resurface as a know it all trader who lives in a cardboard box on Wall Street in a wacky animated show for adults.

Why Doesn't Apple Give Away iPods?

Oh, puh-leeze! Dot com bubble mentality is sooooooo ten years ago. Should strawberry farmers give away blenders to encourage smoothie consumption? Should Ben and Jerry give away bowls, spoons, or cones? Has anyone ever proposed that HBO give away television sets? Here's a clue: Only a fool cloistered in his ivory tower would suggest that a product with such rapid acceptance should be sold at a loss. Furthermore, the iPod's utility extends beyond music storage and playback. This Macintosh user stores encrypted backups of all his digital files on an iPod. Prior to the advent of the iPhone, an iPod was this user's portable calendar and contact book, and it's still easier (IMHO, YMMV) to use an iPod for those tasks that a cellular phone. Sometimes, PhD really does stand for "piled high and deep".

Inside the Radio Industry: The Good, the Bad, and the Ugly

Methinks the ugliest fact about radio is the preponderance of homogeneous radio stations. There are far too many identical radio stations with no local content and no formatting beyond a jaunty first name ("Jack", "Alice", blah, blah, blah) and the wacky, nutty idea to sound like a musically inept cheapskate's iPod shuffle.

Additional frequencies were licensed with lip service given to diversity and local content. Station ownership restrictions gave way to faceless corporate radio, and the bland, "safe for advertising" drivel that followed led to declining revenues.

Try a healthy dose of local, original programming for a few of your surplus frequencies. Sure, you'll have to convince the locals that they'll hear genuine radio after years of selling them swill, but differentiation will initially win market share. Continue to excel through differentiation, and your market may even grow.

Media is about more than cost control and centralized advertising departments. Media is about content, and terrestrial radio is all about local content.

Apple: Priced for Perfection

Once again, I humbly direct Gentle Readers to Mr. Sullivan's citations. Mr. Sullivan cites his own widely ridiculed essay (ce.seekingalpha.com/ar...) while attempting to parallel his gifted insight with the wit and whimsy of The Most High and Mighty Cramer.

This investor prefers to ignore cults of personality, founded and unfounded. This investor prefers the subtle charms of long term business case studies and solid financial underpinnings. Or, in a nutshell, less Cramer, more solid research.

Those of us who purchased Apple in the dark days when rumors of the Biondi Blue iMac first rumbled through Cupertino ought to harvest some gains. Those of us who anticipate the logical integration of several clever gadgets in one well designed new appliance will maintain a position in AAPL and wait for what comes next.

Emotion: The Enemy of Every Investor

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