Streetlife: Retailers and the rest

Retailers and the rest

January 10, 2002: 8:21 p.m. ET

Markets are mostly flat while sales figures from Wal-Mart and Gap give some retailers a boost.
Andy Serwer

NEW YORK (CNN/Money) - Bad case of the blahs today (except for retailers). Stocks just sort of danced around (except for retailers). Mostly stocks went lower (except for... oh, you get the point!). Another problem today: bad news from big companies. Yup! That'll do it boss! (Hey, to quote Bobby Doo-wop, "it ain't easy bein' me! No no no...") And so (now vee begin? Portnoy!) the Dow fell 26 to 10067 while the Naz climbed 2 to 2047. Hey, watch me, Jim Reeves (Sings the gospel!), I mean Andy Serwer on CNN, CNNfn, and Headline News. READ Loose Change! Here's wazzup:

Stockyard

Jumping petunias! Actually there wasn't much to get excited about really. Dow, Ford, and Kmart were all sad sacks today. Here's why: With Dow there is concern about the giant chemical company's asbestos liabilities. Stock fell almost $3 to $31. (Remember, chems are your friend....) With Ford, well, UBS (Daddy) Warburg said that it was going to have a tough time cutting costs because of UAW contracts. Like duh!!! Well it must have been news to some people 'cause the stock dropped $1 to $15. Oh, and Warburg said the stock could go below $14 this year. Looks like it's on its way!... (Hey, who do you like best in "It's a Mad Mad Mad Mad World?" Me? Phil Silvers.)...

As for Kmart, Reuters put it very well I thought: "The company said it does not expect earnings for its fiscal year to meet analysts' forecasts and said it was in discussions with its lenders regarding existing and supplemental financing." Um, gee. That sounds like you guys are in deep doo doo to me. This company does about $37 BILLION a year in sales. It was supposed to make $150 million or so. And now? It's amazing that you can be selling $37 billion of stuff -- and that's real sales, not Enron booked sales -- and be in such trouble...

As for retailers better stead, Wal-Mart said its sales rose 8 percent in December, better than anticipated. (Is that all food, I wonder?) And the Gap, the poor beleaguered GAP! It climbed after saying its sales in Dec. FELL 11 percent, (less than expected!). Said future is brighter too! Also Sears rose after its (pre-charge) numbers beat the Street... Enron and Rite Aid fell but who cares... Big problem on Wall Street is -- even though jobless numbas came in better than expected -- the market has already discounted the recovery! (Okay, is that it? That's it. Can we go home now?)

Techs were mixed

Cisco, WCom, MSFT, Qualcomm up. RF Micro really moved. Got a big new unidentified customer. (Oh tell us, please!!! Come on!!!)

ARE THERE ANY TOGETHER COMPANIES OUT THERE? AT ALL? Okay, things are so cruddy right now, there are so many basket cases out there, that I want to ask you dear Street Life reader to tell me the name of any company that you think unassailably has its act (or 'sit') together right now. Big or small (keep 'em public). Is it: Wal-Mart, Yankee Candle, I mean WHAT? Tell us!

SO WHEN IS EMC MERGING WITH IBM? Just asking.

Dell Opinion

(Another take on Dell right now from a reader.) "...The problem is, this process [direct model] has identified the PC for what it is -- the ultimate commodity. Dell, like every other PC manufacturer, does not really manufacture anything, they assemble other people's parts and put their label on the outside of the "Box." I think Dell's future competition in PC's will come from a much smaller and low cost/overhead competitor -- any 16-year-old kid with a screw driver, a components catalog, and desire can assemble a high-quality custom PC in a couple hours. Regarding overhead cost, think of it this way, assuming that Dell's average PC sells for $1,000 and has a 30 percent margin, Dell must sell almost 9,000 PC's just to cover Michael Dells $2.6 million 2001 salary and bonus -- that is a lot of PCs! As the CFO of a couple mid-sized companies over the past six years, most of the PCs I have had placed in service were built by my own IT staff. We have always been able to build bigger, stronger, and faster PCs AND servers for about 30 percent to 50 percent less. Only when we require large quantities in a short period of time have we gone outside to purchase... almost always to Dell. And I know of more and more companies doing the same thing.

"As you point out, diversification to servers, storage, services, networking, and peripherals will be key to Dell's future growth. But I don't see how Dell will continue to justify significant PE ratios in the future. We have all been enamored by "high-tech" companies and industries, but I think this definition has been significantly oversold and misapplied. I would argue that a refinery operation is dramatically more "high-tech" than a PC and peripheral maker. With the combination of increased competition, lower margins, and ever-shorter product life cycles for its products, how is it that a commodity maker of PCs and related peripherals and services continues to command a premium share price relative to the broader market?... Yes, Dell will continue as a strong company and a force to be reckoned with and will continue to produce revenue and earnings growth, but at much more modest levels. As a much more mature company in an even more mature industry maintaining a premium PE ratio will become an ever increasingly difficult task. Best regards, Mike" [not Dell or Maher!]

Loose Change

Anyone know anything about this operation. The real deal? www.coldstonecreamery.com.... Deep Blue says: "'Oracle - SAP's numbers were good (I don't quite get that one, either). SAP uses Oracle as the database on the connection backend. More SAP sales -- more database sales. You know, like chip makers to PC makers (singing 'Circle of Life' from Lion King.... Also a list of greatest bands of all time: http://dailynews.yahoo.com/h/nm/20020109/re/music_greatest_dc.html ....

"You up on this TV movie -- next Monday night: John Turturro stars as Howard Cosell in 'Monday Night Mayhem,' a TNT movie about the history of Monday Night Football." Thanks Blue, yeah John Tu has been getting props for Cosell, but in the trailers this looks awful....

"Michael Jordan should be seriously considered as NBA MVP but not for all the usual reasons. He is scoring a lot of points (albeit with a lot of shots), he is getting plenty of rebounds, assists and steals. But I think his ability to get his teammates to improve is absolutely unprecedented. Even after an eight-game losing streak, the Wizards are one game shy of last year's victory total with 50 games to go. And that's with injuries to the second and third highest scorers on the team. But that's not all: "You could see a Before Jordan and an After Jordan" in crowds coming to MCI Center, said Del. Eleanor Holmes Norton (D-D.C.). "He's turned around the team. . . He's capable of turning around downtown D.C." Now that's valuable. Full Washington Post story at www.washingtonpost.com/wp-dyn/articles/A59419-2002Jan3.html -robert"....

"Mark Cuban and his $500,000 fine...Are you kidding me?? For what, for speaking his mind? Yes, he makes Pat Croce look like a lifeless body at times, and his antics are growing tiresome, but to be fined that much by the NBA...please. And it's not like the fine will make him shut up. Ridiculous. Classy move by Cuban, though, to donate the same amount to charities. Take that, David Stern."...

"I've only been overseas a couple years now, and certainly have idealised the homeland, but this is a very disturbing story. The guy killed someone, and might get 'up to 20 years?' And he's claiming self-defence (as well as having a hearing problem so he didn't hear anyone say 'Stop')? At 6-1, 275 lbs. (the guy looks like Sgt. Rock on the Web), wailing on a guy on the floor 110 lbs. lighter until he's dead...I mean, can't we all just stand up and unanimously call 'bull shit'?" Um, sad to say you are right!!! Question of the week: Is Dick Vitale right? Should we really feel sorry for the Tar Heels???