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I don't know. Maybe Enron has the dubious distinction of being the biggest shell game ever. But just try and find the little red ball under the shell with Amazon. It's easy ... yeah, right. Lots of sleight of hand here, folks. There is no ball under any of the shells, is there? Could it be in the hand of Jeff Bezos? With Over 1 Million Pre-orders For 'Harry Potter', Amazon Won't Make a Profit.
It's no secret that I have been very negative on Amazon.com Inc. (NASDAQ: AMZN) for years. In that time some folks have made money, plenty have lost money, and those who have sold recently after the huge run-up, maybe a few traders, have made a lot of money.
Still The CEO urged shareholders to be patient following several years of heavy investment in technology, new product categories and new locations such as China that depressed earnings and ate into margins. "We are very focused on the long term, but we also believe that the long term has to eventually come," he said. Bezos noted that in the past, periods of intense investment started to pay off in five to seven years.
Welcome to the 15th installment of The Wal-Mart Weekly, a weekly column dedicated to bringing you insight, wit, facts, results, opinions and just a bit of everything else when it comes down to a very hot topic these days: Wal-Mart.
Last week I mused on how Target Corp. (NYSE: TGT) and Wal-Mart Stores (NYSE: WMT) differ from a psychological shopping point of view. From my experience, shopping at Wal-Mart and Target and two completely different experiences. Wal-Mart offers the big-box -- but staid and boring -- warehouse shopping experience (well, to a point, anyway).
Target, on the other hand, offers what I consider the same experience from a pricing standpoint but completely different from a color, cleanliness and overall pleasant shopping experience. In terms of getting a shopper in the mood for purchasing a bit more than they came for, Target wins hands down in my experience. But, it all depends on your preferred shopping environment I guess.
This week I'll be looking at niche shopping and how Wal-Mart could increase sales using more of a specialized arrangement of categories that are beyond mass merchandise. Based on the stagnant sales at U.S. Wal-Mart sales last year, Wal-Mart's entry into certain product niches could be great for business -- if the retailer chooses to go there.
Continental Airlines Inc. (NYSE: CAL) was downgraded to Neutral from Buy at Goldman Sachs due to valuation, a weak domestic market and oil prices.
Gun-maker Smith & Wesson Holding Corp. (NASDAQ: SWHC) shares are up 6.5% in pre-market trading (8:17 a.m.) after the company topped analyst estimates when it reported fourth-quarter results yesterday. The company also raised its 2008 outlook on expectations of strong sales for pistols, as well as a new range of shotguns and rifles. In numbers, Smith & Wesson earned $5.2 million, or 12 cents a share, on net product sales of $82.6 million, a 59.3% rise. Analysts were expecting earnings of 10 cents a share, before items, on sales of $72.9 million, according to Reuters Estimates.
Boeing Co. (NYSE: BA) CEO James McNerney told newspapers today in Paris ahead of the airshow that he is confident the company can meet its goal to roll its first 787 "Dreamliner" jet off the production line on July 8. I, for one, doubt he would still maintain this to be the case such a short time before the promised date if didn't feel he could deliver. Well, I guess we will know soon enough though.
GE Money, the consumer lending unit of General Electric Co. (NYSE: GE), said it will offer eBay MasterCard in partnership with eBay Inc. (NASDAQ: EBAY) in late June.
Adobe Systems Inc. (NASDAQ: ADBE) is seeing some pressure early this morning after the company reported a 24% rise in profits yesterday after the close to $152.51 million, or 25 cents a share. Excluding certain items, Adobe said earnings per share were 37 cents, beating analysts expectation of 35 cents a share. The lower end of the forecast for the next quarter, however, was below analysts' estimates.
While Apple Inc. (NASDAQ: AAPL) yesterday said over 1 million copies of its Safari for Windows were downloaded within 48 hours of its introduction, many on the blogosphere wonder what was the purpose of creating this in the first place. While the most common arguments are: "1) this is a challenge to Microsoft, and; 2) this is a strategic platform for Apple to offer its own web-based application suite." I, Cringely has a few other reasons in mind.
Sen. Hillary Rodham Clinton and her husband, liquidated a blind trust valued at $5 million to $25 million in April hoping to avoid any possible conflict of interest as the fund included investments in oil and drug companies like Pfizer Inc. (NYSE: PFE), Exxon Mobil Corp. (NYSE: XOM), Wal-Mart Stores Inc. (NYSE: WMT) and more.
As Peter Cohan wrote about earlier today, shrinkage -- the amount of merchandise that disappears from a retailer's store without being paid for -- will hit $3.0 billion at Wal-Mart Stores (NYSE: WMT) this year.
A good percentage of this type of theft often comes from a retailer's own employees, although that is difficult to quantify. Wal-Mart has been in an expense control mode lately and supposedly has cut back on security. Also, shrinkage tends to increase when employees are not very happy with their employer.
Retailing is a tight margin business, especially for discounters. Wal-Mart generated $348 billion in revenue last year and $11.3 billion in net income, for a 3.2% margin. Not a lot of profit on a massive amount of revenue -- so every cost increase can add up quickly.
When visiting local Wal-Marts recently, I noticed that the number of employees appears to have been reduced, the stores are not as well maintained and the organization of merchandise is not what it used to be. The hot selling specialty sale items are not as attractive as they once were. Further, I found items of better quality and cheaper prices at the Lowe's Companies Inc. (NYSE: LOW) store nearby.
Wal-mart is showing classic signs of a business maturing, as same-store sales are growing at or slightly below the level of inflation, dropping prices on merchandise drives volume growth at a much slower rate, and cost controls are tending to backfire.
All told, Wal-mart is in a funk. Look for other places to put your money in the retail space.
Thieves have stolen $3 billion worth of stuff from Wal-Mart Stores, Inc. (NYSE: WMT) in the last year, according to the AP. That's enough to make a pretty good size company but it represents less than 1% of its $348.6 billion worth of sales in the last year.
It turns out that Wal-Mart is not the only one suffering from the problem. Theft cost retailers $41.6 billion in 2006, according to a joint study released Tuesday by the National Retail Federation and the University of Florida. The study found that the theft rate as a percentage of sales rose to 1.61% of sales in 2006 from 1.60% in 2005. So at 0.9%, Wal-Mart is relatively tough to steal from.
Interestingly, it turns out that most retail "slippage" comes from employees. Specifically, employees stole about 47% of the dollars and customers swiped about 32%. Administrative errors accounted for 14%, supplier fraud accounts for 4%, and the remaining 3% is unaccounted for.
Jones Soda Company (NASDAQ: JSDA) has lost whatever fizz it might have had as an investment and is in the process of losing its identity as a brand. Yes, it was a big deal when quirky Jones Soda beat out Coca-Cola (NYSE: KO) to be the soft drink of choice for the Seattle Seahawks at their stadium. But such a venue may be the wrong place to sell a soda that made a name for itself precisely because it marketed unfamiliar flavors in unfamiliar (and somewhat undesirable) locations such as tattoo and piercing parlors, grunge cafes and slacker parks. And yes, it was nice that customers could send in a picture of their mutt as a possible bottle label. But if it wishes to play in the big leagues, Jones will have to come up with some version of a Coke-like flavor to serve to stadium customers who, just because they must buy the product at the game, may not be willing to shell out premium soda prices for Jones' products at the grocery store. And just exactly what is Jones Soda doing for sale at Wal-Mart (NYSE: WMT)? Is Jones Soda now going to market itself as a value-priced soda, except with weird flavors?
Jones Soda cannot seem to settle on a business model, cannot figure out what it wants to be when it grows up. I suggest it might be time to think about becoming a profitable company. The number of cases of soda sold in 1Q 2007 doubled to 1.72 million. But revenue increased by 5% while EPS was ZERO, the same as it was in 1Q 2006. Sell more product, make less money. Counter-intuitive marketing campaigns can be very effective, but at some point Jones Soda must show some ROI to justify its current P/E multiple of 101.09, 400% above the industry average.
It was expected that Boeing Co. (NYSE: BA) would face some challenges as it builds the first of its 787 jetliners. The question was how much these challenges would affect production. Now we further hear of production problems, especially a gap in the fuselage sections creating a 0.3-inch gap where the left side of the nose-and-cockpit section. Boeing, however, insists it can solve these problems (and others) as they arise and in fact, has already solved this one.
Citigroup upgraded Blockbuster Inc. (NYSE: BBI) to Buy from Hold, saying the stock price reflects the high cost of the company's online and store movie rental scheme. Yesterday's announcement that it would offer lower-priced plans for online movie rentals to compete with Netflix Inc. (NASDAQ: NFLX) could help improve costs by eliminating in-store costs as well as help gain market share in rural areas.
J.P. Morgan has upgraded the European tech sector to Overweight from Neutral, citing a "bottoming out of cylical drivers." Nokia Corp. (NYSE: NOK) was started at Overweight, as the broker sees more room to run.
I want an iPhone, but yesterday's email I received from Apple Inc. (NASDAQ: AAPL) regarding the iPhone launch said the iPhone would use iTunes to sync the different application. Now, according the Wall Street Journal, users must submit a credit-card number and personal information if they want to create an iTunes account, despite not needed to make a purchase. This sort of thing just rubs me the wrong way.
A Milan judge has ordered four banks, Citigroup Inc. (NYSE: C), UBS (NYSE: UBS), Morgan Stanley (NYSE: MS) and Deutsche Bank (NYSE: DB) to stand trial for market-rigging in connection with dairy firm Parmalat's collapse in December 2003 after revealing a debt of €14 billion. The banks deny any wrongdoing.
PepsiCo Inc. (NYSE: PEP) has launched yesterday a new cucumber-flavored soda in Japan, Pepsi Ice Cucember. While no cucumbers are hurt in the making of this soda, artificial flavoring resembling the taste are added. This drink is intended as a cool summer drink. Pepsi trails behind Coca Cola Co.'s (NYSE: KO) Coca Cola Japan with only 15% of the Japanese cola market.
According to the Wall Street Journal, two courts, one in Missouri, the other in New York reached different decisions over similar lawsuits against Wal-Mart Stores Inc. (NYSE: WMT) on allegations it underpaid workers. While the Missouri appeals court granted a class-action suit status against Wal-Mart, the New York court denied it, saying complaints should be decided separately.
When I attended the most recent Wal-Mart shareholder meeting, I was quite amazed at the overall feel of the event. It did not feel like a shareholder meeting at all, but more like an entertainment venue. The amount of celebrities brought in before the meeting's day and during the meeting itself was quite impressive. From Jimmy Buffett to recent American Idol winner Jordin Sparks, there was no shortage of entertainment talent.
But that was not the focus. First and foremost were Wal-Mart (NYSE: WMT) associates. The entire shareholder meeting centered around Wal-Mart employees. Stories about the heroism and genuine goodness of Wal-Mart's employees went on for hours, with several examples from Wal-Mart locations outside the U.S. In looking at this Wal-Mart employee's account, this seems to be the highlight of the year for many Wal-Mart employees. It's like an awards convention of sorts if certain associates are accepted to attend, and the general attitude is that it's quite an event to be an actual associate and also be in attendance when one of these shareholder meetings happen.
The business portion of the meeting, as I referenced earlier, was actually too short from my perspective. Maybe Wal-Mart likes it that way. With WMT shares having remained stagnant for years, I would have though there would be more pressure from institutions holding shares to get Wal-Mart's "butt in gear" when it comes to doing something to ensure a decent return is happening on all those millions of shares. While it's hard to grow a $344 billion company, there are definitely areas to improve upon.
The Wall Street Journal (subscription required) reported that Time Warner Inc's (NYSE: TWX) Warner Bros. is planning to release movies to video-on-demand services at the same time as the DVD launch to see if they can expand one distribution pipeline without harming another.
Fidelity Investments, which was the third-largest shareholder in Dow Jones, has sold almost all its shares in the company, which is the target of a $5B takeover by News Corporation (NYSE: NWS), reported the New York Post.
While April sales plummeted at several retailers this year, May sales showed modest gains over the year-ago period. This produced a sigh of relief from industry watchers, who are monitoring energy prices and consumer confidence levels more closely than their own pulse, I'll bet. Combined with a very slow April and a "modest" gain for May, are these two months indicative of an overall slowdown in consumer spending that could last until fall?
Housing prices and gasoline prices are the usual suspects being mentioned as a reason for small growth in May (like always), as an index of 50 major chains averaged a 2.5% increase in same-store sales for May. With April's cumulative 1.9% decline, what are the signs here? April's Easter holiday fell early and it was the coldest April in over a decade, so it's easy to see why things ended pretty dismally. But May's increase is not all that bad!
Wal-Mart Stores (NYSE: WMT), the world's largest retailer, reported a 1.1% same-store sales growth rate in May, while competitor Target Corp. (NYSE: TGT) saw a 5.8% increase for the same time period (as well as 3% to 5% forecast for June). Target's strategy of attracting higher-income shoppers to its cleaner and trendier stores continues to pound at Wal-Mart's door. Target's reported shopper averages $50,000 per year in income -- and I can almost guarantee that Wal-Mart's average customer has nowhere that level of income (which is reportedly $35,000). What does that say? That wealthier shoppers are shopping more at Target (in lower overall numbers) than Wal-Mart's core (but less affluent) customers are spending. No surprise there.
Wal-Mart's (NYSE: WMT) focus on China and India as leading international prosperity markets is pretty well-known by now. While Wal-Mart's growth is stagnating here in the U.S., the world's largest retailer is looking to immediate gratification in international markets as it tries to grow that enormous $344 billion full-year revenue stream even higher.
Wal-Mart's partnership with India's Bharti is going to take some time since there are brand management and legal issues to get past, but Wal-Mart expects to begin opening the first of six stores in less than a year. While that may sound small, Bharti Enterprises group chairman and CEO Sunil Mittal indicated that these initial openings will just be the start, as Wal-Mart/Bharti may "put up several hundred stores over four to five years".
Unlike Wal-Mart's purchased interest in China's Trust-Mart retailer (which gave the company instant access to the Chinese market), India is a little different. Wal-Mart and Bharti are operating as a joint venture, which provides a few details that must be shored up before complete retail operations can commence. Wal-Mart's interest in India, though, goes beyond a possible revenue stream. The world's largest retailer has stated that it intends to source more products from within India as well as develop a supply chain in that country.
So, as same-store sales slow in the U.S. (unlike some of the competition), Wal-Mart's progressive international strategy is starting to take some serious roots here.
Yesterday marked the quick-and-deliver day that PC maker Dell (NASDAQ: DELL). was to begin selling two of its Dimension E521 PC models inside Wal-Mart stores nationwide. Two models, priced at $498 and $698, will now join Hewlett-Packard, Acer and other manufacturers on Wal-Mart's (NYSE: WMT) shelves. Is this a new long-term strategy or some kind of experiment to appease Wall Streeters who are screaming for Dell to compete more heavily against Hewlett-Packard? Read on.
After having quickly looked at PCs available at www.walmart.com, the entry of Dell's desktop PCs should not really send some kind of stampeding PC sales shock wave in the collective aisles of Wal-Mart electronics departments. In fact, this "experiment" by Dell may just be a way for the retailer to get rid of some aging inventory and get its feet wet in the retail game at the same time. If you think "Dell is back in retail!" as a main theme of why it so rapidly announced and made available some of its lower-end products in the U.S. stores of the world's largest retailer, think again. This is a test or possibly a one-off activity by Dell, plain and simple.
The question is how this experiment will shape up. Will customers immediately recognize the Dell brand inside Wal-Mart stores and flock to purchase these Dimension systems? Hard to day, since Wal-Mart doesn't really break out sales of PCs (all brands) -- so who knows how many total PCs Wal-Mart actually sells (beyond industry analyst estimates). If Dell sees the limited amount of PCs is sold Wal-Mart having a tepid response there, what will it do? Move on to the next experiment? Where?
Every week there is plenty to write about that I find amusing or ironic in the business world or stock market, on and off our site. I missed the last couple of weeks not for lack of material but time. This week I must start with something old that just won't go away, Amazon.com (AMZN) which closed Friday at a share price of $73.24.
This week I posted the story Amazon - everyone gets it but me where I highlighted various Amazon stock metrics that made no sense whatsoever and pleaded with someone, anyone to explain them to me. Alas, not a soul chose to respond. And since I freely admitted "not getting it" I did not leave room for those that really have no explanation but like to tell me what an idiot I am. A decade old this company has a book value of less than 2 cents on the dollar and eeks out a profit margin of 1.77%. Yes, it's profits increased in the last quarter by 115% to everyone's surprise, however, a 1000% increase if somehow directly translated into Amazon's a book value would still leave it under 20 cents on the dollar - that's hysterical to me.
Since nobody volunteered any information to help me solve the riddle I did some homework myself and a friend at a major investment house gave me a hint that lead to Who owns Amazon.com - really? and a reminder that it is not the public pushing this stock to silly valuations. It may be insiders and major shareholders playing "a game of chicken" with investors shorting the stock, of which there are many. I think after the battle is over this stock is going back down.
In Fortune magazine, May 28, 2007 issue I came across Amazon's 7-year Itch where they actually make some comments similar to mine. After all this time and all the efficiencies of the Internet in relation to Amazon's business model, it is making a smaller profit margin than the brick and mortar retailers like Wal-Mart (WMT) and over the last seven years an investor would have made 3.1% on their money.
So this is no joke I would like to learn and so would other intrigued investors if someone has any answers.
Enjoy the day.
Those of you who are new to BloggingStocks can check out my other stories and read Chasing Value or Serious Money to find more potential opportunities and verify my track record as well.
Sheldon Liber is the CEO of a small private investment company and the vice president for design and research at an architecture & planning firm. Check out his other posts for BloggingStocks here.
As Wal-Mart Stores, Inc. (NYSE: WMT) sales slow down and competitors take some of its business away, the largest retailer tries to not only to reinvigorate sales at its U.S. locations but is also looking at other ways to make money. In that vein, the retailer tried to enter into the banking business last year as processing customer transactions internally would have saved millions of dollars in costs it has to pay to outside parties now.
Those efforts were shelved after some feared that Wal-Mart would enter the retail banking business and use its might to offer banking services to customers. In a way, this "captive audience" approach frightened many (including many banks), so Wal-Mart withdrew its FDIC application and let the movement die. Is the company trying to get into the business of financial services but without offering any actual banking services? It certainly looks that way.
The resultant secondary effort from that movement is now in play, as Wal-Mart wants to offer a prepaid shopping card to customers that can be used in stores or on its website. The card will be issued by Visa and will not require a checking account. What Wal-Mart wants to do here is get as close to taking customer money as "deposits" as possible, but without being a bank. The card will have a limit of $3,000 and could be used at ATMs, other stores and on internet purchases, at Wal-Mart or other stores.
Consolidation in the food industry has only left a few of the specialty companies trading on the major exchanges. One such outfit is headquartered in Stockton, California.
Diamond Foods (NASDAQ: DMND) processes, markets and distributes culinary nuts and snack products under the Diamond, Emerald and Harmony brands. The firm's walnuts, almonds, Brazil nuts, hazelnuts, pecans, pine nuts and Spanish peanuts are sold for snacking and for use in home cooking and restaurant recipes. Mass merchandise customers include Wal-Mart (NYSE: WMT), Safeway (NYSE: SWY) and Kroger (NYSE: KR). The firm does business in North America, Europe and Asia.
The company pleased investors earlier in the week, when it reported Q3 top and bottom line results that handily topped Street estimates and guided FY07 expectations to levels in-line with analyst ranges. DMND shares popped into the initial stages of a bullish "flag" consolidation pattern on the news. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.
Brokers recommend the issue with one "strong buy" and four "holds." Analysts expect a 43% growth rate, through the next year. The DMND Price to Sales ratio (0.57), Price to Book ratio (2.25), Price to Cash Flow ratio (14.95), Price to Free Cash Flow ratio (30.37), Sales Growth rate (43.09%) and EPS Growth rate (-0.20 to -0.09 yr/yr) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 54% of the outstanding shares. Over the past 52 weeks, the stock has traded between $13.15 and $19.93. A stop-loss of $15.10 looks good here.
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Welcome to the 15th installment of The Wal-Mart Weekly, a weekly column dedicated to bringing you insight, wit, facts, results, opinions and just a bit of everything else when it comes down to a very hot topic these days: Wal-Mart.
Main market news 
Jones Soda Company
Main market news 
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Street estimates and guided FY07 expectations to levels in-line with analyst ranges. DMND shares popped into the initial stages of a bullish "flag" consolidation pattern on the news. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.
