{"id":33664,"date":"2012-11-22T10:34:36","date_gmt":"2012-11-22T15:34:36","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/2012\/11\/three-retailers-that-should-be-thankful-they-are-still-in-business-this-thanksgiving\/"},"modified":"2012-11-22T10:34:36","modified_gmt":"2012-11-22T15:34:36","slug":"three-retailers-that-should-be-thankful-they-are-still-in-business-this-thanksgiving","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2012\/11\/22\/three-retailers-that-should-be-thankful-they-are-still-in-business-this-thanksgiving\/","title":{"rendered":"Three Retailers That Should Be Thankful They Are Still in Business This Thanksgiving"},"content":{"rendered":"

By The Sizemore Letter<\/a><\/p>\n

This is the time of year for giving thanks, and we all have quite a bit to be thankful for.\u00a0 Though we complain about having a divided country, we live in a place where power changes hands without violence.\u00a0 And for all the angst about rising taxes, at least we live in a country where work is still rewarded with the possibility for great wealth.\u00a0 The economy isn\u2019t the healthiest right now, but it\u2019s still a fine time to be an American.<\/p>\n

That said, there plenty of companies who aren\u2019t doing particularly well and who should be thankful that they are still in business at all.\u00a0 And by next Thanksgiving\u2026they may not be.<\/p>\n

I\u2019ll start with electronics chain Best Buy (NYSE:$<\/span>BBY<\/a>).<\/strong> Best Buy posted earnings this week that were wide off the mark of expectations, sending the share price down a quick 8%.<\/p>\n

Big deal; companies miss earnings all the time, right?\u00a0 Yes, but Best Buy\u2019s problems run far deeper than a single earnings release.<\/p>\n

The company has become the unofficial (and unpaid) showroom for the entire electronics industry.\u00a0 Want to check out the new Samsung Galaxy phone\u2026or Microsoft (Nasdaq: $<\/span>MSFT<\/a>)<\/strong> tablet?\u00a0 Then you drive to Best Buy.\u00a0 But do you whip out the credit card and buy <\/em>it there?\u00a0 No, probably not.\u00a0 Not when you can go to your smartphone and order it on Amazon.com (Nasdaq:$<\/span>AMZN<\/a>) <\/strong>or another discount online retailer for far cheaper\u2026and get free shipping.\u00a0 \u00a0The Washington Post <\/em>reported<\/a> that fully 20% of shoppers plan to \u201cshowroom\u201d their Christmas shopping this year.\u00a0 And this number should only continue to grow.<\/p>\n

There is no easy way out of this problem.\u00a0 Best Buy can improve its web presence and try to attack Amazon head on, as Wal-Mart (NYSE:$<\/span>WMT<\/a>)<\/strong> is attempting to do.\u00a0 But they are still going to be at an enormous cost disadvantage for having to maintain an expense network of stores and employees.<\/p>\n

Perhaps Best Buy should accept its role as Samsung, Sony (NYSE: $<\/span>SNE<\/a>)<\/strong> and Apple\u2019s (Nasdaq: $<\/span>AAPL<\/a>)<\/strong> showroom and ask that these manufactures pay them for the publicity.\u00a0 I don\u2019t see that approach working, mind you, but their current approach isn\u2019t working either.<\/p>\n

Next on the list is JC Penney (NYSE: $<\/span>JCP<\/a>).<\/strong>\u00a0 There comes a point in a retailer\u2019s life when it is simply no longer relevant.\u00a0 Best Buy still gets foot traffic, and some of those visitors do actually buy while in the store (after checking the prices of competitors on their phone, of course).<\/p>\n

But JC Penney?\u00a0 Not so much.<\/p>\n

As I wrote in a recent post, JC Penney is toast<\/a>.\u00a0 The company is a \u201ctweener,\u201d squeezed between Wal-Mart and Target (NYSE:$<\/span>TGT<\/a>)<\/strong> on the low end and Dillard\u2019s (NYSE:$<\/span>DDS<\/a>)<\/strong> and Macy\u2019s (NYSE:$<\/span>M<\/a>)<\/strong> at the mid-range price point.\u00a0 And I\u2019ve said nothing yet about deep discounters such as Ross Stores (Nasdaq:$<\/span>ROST<\/a>)<\/strong> or, again, online retailers such as Amazon.<\/p>\n

There is no compelling reason to go to a JC Penney store, and it shows in the company\u2019s results.\u00a0 Revenues have been stagnant for years\u2026actually fell by 26% last quarter.\u00a0\u00a0 Earnings are firmly in the red and have been for the past four consecutive quarters.<\/p>\n

In a weak overall economy, I do not see a future for a marginal retailer like JC Penny.\u00a0 Outright bankruptcy might still be a few years away\u2026but I see no recovery for a store that has already fallen so far in relevance to shoppers. \u00a0I challenge you to name a single friend or family member who has shopped there in the past 12 months.<\/p>\n

And finally, we come to RadioShack Corp (Nasdaq:$<\/span>RSH<\/a>).<\/strong> \u00a0\u00a0I do not see RadioShack surviving to see another Thanksgiving, at least not in its current form, and from the looks of things, neither does the market.\u00a0 The stock has lost 84% of its value over the past year and over 90% since 2011.<\/p>\n

If Best Buy\u2019s business model is under threat, then how much worse off must RadioShack be?\u00a0 The company\u2019s niche market of specialty electronic parts and components has been absolutely killed by internet competition.\u00a0 An on those days you need a particular part or cable immediately and can\u2019t afford to wait for shipping, you\u2019re going to get a better selection at Fry\u2019s Electronics or even Best Buy or Wal-Mart.<\/p>\n

RadioShack has tried multiple times to reinvent itself by selling things such as mobile phones and service and mainstream consumer electronics.\u00a0 But by doing this, they are competing head to head with big-box retailers and the mobile phone providers themselves.\u00a0 It\u2019s hard to see how RadioShack can compete here, and frankly, the numbers speak for themselves.\u00a0 The company has had three consecutive losing quarters\u2026and this losses have gotten bigger with each release.<\/p>\n

RadioShack is also saddled with $750 million in debt\u2026$375 million of which is due in 2013\u2026and a market cap of only $193 million.<\/p>\n

Investors might<\/em> get bailed out by an acquisition here.\u00a0 At the right place, Best Buy or some other electronics retailer might the chain to be worth buying.\u00a0 But barring this, I expect RadioShack to bleed to death in the very near future.<\/p>\n

Disclosures: Sizemore Capital is long WMT and MSFT.<\/em>
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