CC is down 18% today. Ouch. If anything, I think Best Buy and CC are canaries in the coal mine of consumer spending. *Time will tell. But I think retail is toast soon. *ET Disclaimer - I've been wrong before, and will be wrong again.
http://today.reuters.com/news/artic...87_RTRIDST_0_CIRCUITCITY-RESULTS-UPDATE-3.XML NEW YORK, Dec 19 (Reuters) - Circuit City Stores Inc. (CC.N: Quote, Profile , Research) reported a surprise quarterly loss on Tuesday after it cut prices on hot electronics like flat-panel TVs and computers to lure customers during the holiday shopping season. The No. 2 U.S. consumer electronics chain, whose results came a week after larger rival Best Buy Co. Inc. (BBY.N: Quote, Profile , Research) posted disappointing earnings, also cut its fiscal-year outlook. "It's much worse than expected," said Sanford C. Bernstein & Co. analyst Colin McGranahan of the results. "The gross margin situation is very concerning." The shares dropped 17 percent in early trading on the New York Stock Exchange. Best Buy fell 3.3 percent to $47.70. Circuit City, which has been working to turn around its business and regain market share from Best Buy, had a loss of $16 million, or 9 cents per share, for the fiscal third quarter ended Nov. 30 compared with a profit of $10.1 million, or 6 cents per share, a year earlier.
Thanks for that article, HNS. It looks like the retailers are cutting prices on their big money makers, disproportionately hitting margins. Victor - I am setting up a short trade on some retailers, including Best Buy. Not to go off topic, but Pfizer just announced a 18 billion dollar buyback and and 19% increase in its already nice dividend.
Buylo, I saw the PFE news last night. I wondered if you were still in. Glad to see you are still making $$$ in it.
I haven't committed, Victor. I see that both CC and BBY are near 52 week lows. The critical question for me is how tied to the new home market these two are. I assume they get a fair share of their revenues from appliances, tvs, etc., purchased when people buy a new home (and a used one, in many cases). I wish I could figure out how much of their revenue is attributable to this factor.
Remember Highland Appliance (those in Michigan)? It's a really good question. I don't know, inda. I do think Costco is starting to hurt BBY and CC where it really counts - on high margin items. If Costco expands even further in this area, watch out below. Just my .02