This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Toxic Psychology Dooms Once Great American Retailers

Management starts to sense victory during this period of stabilization. Wall Street analysts, such as one quoted in a recent BBY story at TheStreet, only reinforce the false optimism:

Management spoke to incremental cost cutting opportunities on its call, but we think the firm will be challenged to deliver superior customer experiences while slashing its cost structure ... We believe management has made smart decisions here, and is coping valiantly with tough positioning. Also, we realize that holiday is a bad time to judge the efficacy of emerging initiatives, so we model a much better showing in upcoming quarters" (bold emphasis added).

That excerpt shows several things --

One, a company focused on what amounts to the non-strategy of burning the furniture to build a fire. (At least the analyst half-acknowledged it's probably not going to work).

Two, the notion that somehow this non-strategy is smart, providing further fuel to management to continue along an illogical path.

Must Read: Death at Sears, Best Buy, JCP Hurts America

Three, excuses. The non-strategies didn't work this time around because of a) "tough positioning" (but the company copes "valiantly") and b) the holidays, which one might argue are the best time to test out new ways (if only they were new!) given the abundance of people out shopping and looking for deals.

See what I'm getting at here?

As the typical retail executive stabilizes the operation, the idea of ultimately changing everything quietly ceases to be a goal. Because the stabilization objectives are working so well -- or at least that's what the people you choose to listen to tell you -- maybe the old model wasn't so bad after all. It merely required a refresher. You know, something like Best Buy's Renew Blue program or Sears's cheap Amazon Prime imitation Shop Your Way.

The longer you put off actual -- and very necessary -- radical change, the less likely it is to happen. The more you convince yourself that what you're doing now might be the right way to proceed after all -- and misinterpret results or let others do it for you -- the less likely you are to change. You roll with what you know -- at the board level, in the executive suite, among the rank and file and at the individual level.

Using hockey lingo, the more these guys drag the puck (continue doing what they've been doing), the best result they can realistically hope for is to kiss their sister (what we called a tie in the pre-shootout NHL). Enough talk about stabilization. Blow the entire operation up and start from scratch. The first major retailer to set out on that course will be the one to finally incite meaningful and long-lasting change in physical retail.

We're not spinning one-hit wonders here. I'm already working on the next retail article that flows seamlessly from this one. Follow me on Twitter (TWTR) and at TheStreet. In the next retail piece we start to imagine, with specifics, what "meaningful and long-lasting change" might look like.

--Written by Rocco Pendola in Santa Monica, Calif.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks. Rocco Pendola is a columnist for TheStreet. Whenever possible, Pendola uses hockey, Springsteen or Southern California references in his work. He lives in Santa Monica.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AMZN $532.54 0.00%
BBY $37.78 0.00%
JCP $9.92 0.00%
SHLD $24.80 0.00%
AAPL $110.38 0.00%


Chart of I:DJI
DOW 16,472.37 +200.36 1.23%
S&P 500 1,951.36 +27.54 1.43%
NASDAQ 4,707.7750 +80.6910 1.74%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs