Tag Archives: Wal-Mart

J C Penny are declining alongside other big name retailers like Macy`s that reported a disappointing gross margin outlook

The competition in the retail market is huge. Just look at J C Penny. That stock has plummeted. It peaked in February 2007. Right before the financial crisis it peaked at $85, and now the same stock can be traded for $2,41. What a ride.

J C Penny is not alone. Swedish H&M is in the same boat. The stock peaked in February 2015, but the journey from 363 SEK to 125 SEK is huge. They both need to change their strategy as soon as possible as online retailers are flooding the market all around the world.

J C Penny was founded in 1902 by James Cash Penny and William Henry McManus. That`s 116 years ago. It is an American department store chain with 850 locations in 49 U.S states, and Porto Rico.

The company has been an internet retailer since 1998. It has streamlined its catalog and distribution while undergoing renovation improvements at store level. Competitors like Alibaba, Amazon and Ebay will push their prices down. So will competition from Wal-Mart, Kohls, Macys and Target.

The arrows are going in the opposite directions. Prices and lower margins are going down while house prices are going up. Internet retailers can afford to push down the prices because they don`t have any stores.

With 98,000 employees and growing wages it speak for itself. On January 15, 2014, the company announced it was closing down 33 underperforming stores and laying off 2,000 employees. A year later, they announced that they would close 39 underperforming stores nationwide and layoff 2,500 employees and the trend has been going since then.

In May 2018, the company reported an adjusted loss of $69 million in the first quarter and lowered its projections for the year. Sales fell 4 percent.

Earlier this year, J C Penny announced it would cut 360 jobs at its stores and corporate headquarters. They lowered its earnings forecast for the year to 13 cents per share at best, and said it can lose as much as 7 cents.

J C Penny finished the quarter with just $181 million in cash, which is down from $363 million a year ago. Much of the big decrease was because of a $190 billion debt replace. Not only that; in May, they announced resignation of their CEO Marvin Ellison.

Gross margin has declined significantly since 2016, but the U.S Census Bureau reported strong retail sales growth in May and June which can be positive for J C Penny. Sales at departments stores increased 1,8 percent YoY in May and were flat in June.

I said it many year ago; the retailer market is dead. Just look at the trend. Retailers must wake up before they end up like Radio Shack. New business models must be developed and there is no doubt that a few of them will win at the end.

It will be an enormous wild ride for the JCP stock from start on Thursday.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Wal-Mart spend a lot of money on e-commerce

More retailers are on the way with their Q2 reports, and this time I will take a closer look at Wal-Mart Stores Inc. The stock peaked at an all-time high early last year, but slid. Now, the stock is on the way up again. To the top.

Wal-Mart Stores are changing and that`s fast. They are on the way to change to an e-commerce business from the traditional retail business. The firm has invested a lot of money in improving back and front-ends of the e-commerce business.

 

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A couple of weeks ago, Wal-Mart acquired online retailer jet.com, for $3 billion. The company can feel the pressure from its biggest competitor Amazon, and their acquisition of jet.com will strengthen their e-commerce business.

Wal-Mart also sold its Chinese e-commerce business, Yihaodian. Everything was sold to the Chinese online retailer JD.com. All this is done to stay more focused on the international e-commerce presence.

CEO Doug McMillon said: «E-commerce growth here is too slow. The U.S number is better than the global number, but neither is as high as wed like. We can see progress against several of the necessary capabilities we need to win in e-commerce, but were still working on a few others. We need them all to come together to see stronger growth.»

The company has increased its labor costs in addition to a stronger dollar, and that in turn has given them a negative YoY profit growth for the last 5 consecutive quarters. Stiff competition from Amazon has also turned Wal-Mart`s revenue negative in the last two quarters of fiscal 2016.

Store sales have come in positive for the last 7 quarters, despite the downturn on the top and bottom-line. The world`s largest retailer with its market cap of $225,42 billion, is guiding for US same store sales growth in the range of 1% – 3%, and Wal-Mart come out with a report on Thursday.

The Estimize consensus is looking for earnings per share of $1,04 on $120,39 billion in revenue. Compared to a year earlier this reflects a 4% decrease in earnings and flat sales.

Earnings estimates have increased 3% since the last quarterly report, with sales estimates unchanged.

Wal-Mart Stores Inc will report on 18th August, before the markets open.

 

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Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Do you know the Target?

Last week I wrote about the biggest U.S retailer Wal-Mart. While the stock market had a terrible start of the year, Wal-Mart went in the opposite direction. What about the second largest discount retailer Target? The stock have so fare in 2016 been flat.

Target is over 100 years old, founded by Goodfellow Dry Goods in 1902, but the first Target store was opened in 1962. A lot of things have changed since then. Target operates 1,801 locations throughout the U.S.

Their retail formats include the discount store Target, the hypermarket SuperTarget, and small-format stores previously named City Target and TargetExpress before being consolidated under the Target branding.

Target

A lot of retailers will come out with reports this week, and Target is one of them. They will report on February 24, before the open.

Estimize is looking for EPS of $1,54 and revenue of $21.896 billion, in-line with Wall Street on the bottom line, and around $35 million greater  on the top-line. Target is projecting relatively flat earnings growth compared to the same period last year.

Target has gone online long time ago, and they had a record online traffic during the recent holiday shopping season. Amazon is the king in online-shopping and Target has a long way to go to come up to Amazon`s level.

Last quarter, digital channel sales surged 20% while also adding to comp store sales growth.

Target have a lot of job to do at handling massive inflows, and days like Cyber Monday, Black Friday and the holiday season are leaving many consumers frustrated. The company have made strategic hires combined with a renewed focus on higher-margin apparel.

Compared to Wal-Mart, Target generate above-average margins which is higher than their biggest rival Wal-Mart. The reason for that is Target`s higher –margin segments like home goods which accounts for about 36%. Wal-Mart generates only 14% in that segment.

Consumer prices in the U.S went up 1,4% YoY in January of 2016, following a 0,7% increase in the previous month. The inflation rate accelerated for the fourth straight month, but the U.S food inflation has dropped sharply last 12 months. From 3% last year to only 0,8 in January 2016.

Target hope to reach their goal in 2016 with a new and fresh leadership at the top. One of their goals is to make a multi-channel approach, which means they are looking for customers who shop in more than one channel at a time.

Their smaller-format stores will be 50% smaller than the typical 130,000-square-foot stores. Target`s urban locations will be about 45,000 square feet in size, and the reason for that strategic change is that the productivity levels are double those of traditional stores, and those stores will come in busy city centers.

Target recently sold its pharmacy business to CVS in a deal worth $1,9 billion, and in the next 6 to 8 months all 1672 Target pharmacies will be rebrand to read CVS, operating through a store within a store format.

This partnership is expected to serve as a compliment to the customer experience which will help drive higher traffic. The company is also focusing on the development of smaller format stores to penetrate urban and metropolitan areas.

In addition; Target has eliminated over 3000 stores and corporate employees in the U.S, estimated to save the company $2 billion.

All the changes makes Target`s future bright and I assume the new employees know the new target.

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Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Google will deliver milk to your door

Google are expanding and  have a new strategy to make a huge impact into customers daily life. They want to deliver milk on your door. Yes, milk and other perishable goods like meat, tomatoes, bread and eggs, and the first delivery starts next Wednesday.

Google have become the worlds most valuable company, and earn money on ads, internet-connected thermostats and high-speed service. They have the worlds best search engine and almost everybody in the world can use the site, but what about the grocery delivery?

That`s not so easy as a search engine and of course it will be impossible to deliver to the whole world, so they will start in Los Angeles and parts of San Francisco. This delivery service is part of Google Express, which partners with retailers in some U.S cities.

GoogleExpress

We know that Wal-Mart will expand their e-commerce business and Amazon Fresh is already in the same business and have taken a great stake in the market. Other competitors are Fresh Direct, Safeway and Instacart Express, but this business is complicated and not so easy.

Many of the companies are struggling to earn money because the margins are too small with about 2% on grocery sales. In addition to low profit margin you have high delivery costs and sometimes more expensive food.

Google said they will take advantage of holding inventory in costly warehouses and keep the cost down by making deliveries from there. Amazon deliver from their own. Online grocery shopping is a $11 billion business with 9,6% annual expected growth, but the margins are low.

Annual membership for Google Express will cost $95 and fresh-food deliveries will cost $2,99 per order. Non-Express members will pay $4,99 an order.  They also have bold goal which is to deliver within two hours.

Google will collaborate with Costco Wholesale Corp, Whole Foods Market and Smart & Final Stores in San Francisco. Furthermore, they will deliver from Smart & Final, Costco and upscale grocer Vincente Foods in Los Angeles.

A good friend of mine started a similar project 18 years ago. He is innovative and smart, but the concept was short-lived and he lost millions. It`s not because the concept was bad, but I think he was way to early in the market.

The same happened with Webvan Group. They went bankruptcy in 2001 and lost nearly one billion. Timing is important, so Google are launching Google Express in right time I think. So is it with my friend. He started with the same project last year.

Google Express has been around for a while, and this is a coming competitor to Amazon. You can order from many stores on Google Express, like Staples, Toys R Us, Target and Barnes & Noble to name a few. They deliver in Manhattan, Chicago, San Jose, Boston and Washington DC.

Google Express is a pilot project and if it works in Los Angeles and San Francisco, they will expand to other cities near you.

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Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Wal-Mart have huge challenges

Wal-Mart is an interesting case. While the stock market have plummeted, Wal-Mart have been strong so far in 2016. Up over 8%. Wal-Mart announces earnings on Thursday and what can we expect from a retailer with so many challenges in the market right now?

Estimize calls for EPS of $1,45, which is one penny lower than Wall Street. Revenue expectations of $130,513B are greater than the Street`s consensus of $130,461B. Revenue estimates have fallen by almost $1B in the last 3 months.

This quarter it is expected to post a 10% decline in EPS YoY, with revenue estimated to fall 1%. Declining expectations have to do with guidance Wal-Mart gave in October, lowering FY 2015 guidance and claiming YoY sales growth would be flat due to wage hikes and FX headwinds. WMT

Wal-Mart have 11,600 stores and know that the market have changed to a more difficult retail climate. Wal-Mart said in January that it will close 269 stores worldwide, but it also said that in the next year it plans to open about 140 new stores nationwide.

In the U.S, Wal-Mart will also shut down all 102 Wal-Mart Express locations, which is a pilot program that started five years ago. It will close 23 Neighborhood Market locations, 12 Wal-Mart supercenters, 7 stores in Puerto Rico, 6 discount centers and 4 Sam`s Clubs.

Many claims that Wal-Mart have strong competitions from Amazon, and Wal-Mart said it will focus more on e-commerce and expanding pick-up services for customers. The retailer will open 50-60 new Supercenters, 85-95 new Neighborhood Markets and 7 to 10 new Sam`s Clubs across the U.S in fiscal 2017.

The retailer was a leader in grocery sales from mid-1990s to 2000s. Grocery still makes up about 55% of its revenue.

Wal-Mart`s ”click and collect” concept, where customers can order online and then get their merchandise at the store, give the workers more fear that this could be the beginning of more cuts in the future.

A big surprise for many was Wal-Mart`s announcement to raise base wages for its U.S workers. Wal-Mart is a cost-conscious retailer and it raised hourly wages to a minimum of $9 last April, and is set to bump them up to $10 this February.

The federal government has not raised the minimum wage since 2009 when  it lifted it from $2,15 per hour to $7,25 per hour.  Some cities are planning to raise wages to $15 per hour.

Wal-Mart is not the only one to close its stores. Sears Holding Corp will close a number of Kmart stores, while Macy`s will close 40 and cut 4,800 jobs. E-commerce and an improved superstore experience are growth drivers for Wal-Mart, but wages can be a challenge in the future.

Amazon are more efficient and generate $650,000 in revenue per employee. To compare, Wal-Mart generate $220,000 and this is a disadvantage for Wal-Mart with 2,2 million employees vs Amazon`s 154,000.

The average employee at Costco makes $21 per hour, so Wal-Mart have a lot of challenges now.

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Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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