Marek Fuchs
We all now that old philosophical question: If a tree fell in the woods, but no one heard it, did it still fall? The Business Press Maven's favorite variation on it is this: If a husband said something in the woods, but there was no one there to hear him, would he still be wrong?
For our purposes today, let's go with this version: If a giant retailer reported decent results, but it was all due to cost-cutting and the fundamental conditions of the stores remained questionable, did the company still report decent results? When it comes to headlines about Gap(GPS Quote - Cramer on GPS - Stock Picks), corners of the business media -- those gullible little devils -- sure thought so. Worse, beyond the headlines, few media reports, if any, related Gap's sales to inventory -- a key measurement, at least to those who might want to achieve of level of understanding about what the future might hold. Look at this Reuters headline: "Gap profit beats Street by a penny." This misbegotten headline plays up the Wall Street-business media expectations game to the exclusion of all else, including the central fact that Gap only beat because of cost-cutting. From a financial perspective, there is no great shame in cost-cutting. But whether the company fires some of its employees or trims its inventory, there is a finite amount of cost-cutting it can do. When sales are still dropping like rocks but a profit beat was eeked out because of cost cuts --well, mention the dropping rocks.
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