Retail Reports Dispense With Reality
Provided you can maintain courage that won't fail, why don't you come and play a little parlor game with The Business Press Maven this weekend?
I'll give you a mistakenly positive headline and a portion of the misleading article commentary about
JCPenney
(JCP) - Get Report
and
Nordstrom
(JWN) - Get Report
that followed and you tell me what underlying fact is left clear out of the equation.
Want a hint of what to look for? See if there is any mention on when these expectations were last set and by what magnitude they were reduced at that point. That, after all, is what lets you know best what near terms trends in the business are and management's grasp of their reality, as well as whether a retail recovery is truly at hand.
They Just Don't Get Retail! |
var config = new Array(); config<BRACKET>"videoId"</BRACKET> = 1559484759; config<BRACKET>"playerTag"</BRACKET> = "TSCM Embedded Video Player"; config<BRACKET>"autoStart"</BRACKET> = false; config<BRACKET>"preloadBackColor"</BRACKET> = "#FFFFFF"; config<BRACKET>"useOverlayMenu"</BRACKET> = "false"; config<BRACKET>"width"</BRACKET> = 265; config<BRACKET>"height"</BRACKET> = 255; config<BRACKET>"playerId"</BRACKET> = 1243645856; createExperience(config, 8); |
Here's a real happy talk headline from Reuters, which (accepting on behalf of many others) will receive this week's dreaded Business Press Maven "Back of the Hand" award:
Department store sales weak, but beat Street
Got that? They beat Street estimates. With that comes the implication that near terms trends in the retail business might be good, meaning high gas prices and foreclosed homes be damned, a recovery is at hand.
The lead was too positive by half because it came complete with the same built-in caveat we saw in the headline: Results beat estimates!
"The weak economy took its toll on department stores on Thursday, as retailers Nordstrom, Kohl's and J.C. Penney reported lower first-quarter net profits, with all citing challenges stemming from the weakened U.S. economy.Although the results were glum, investors had expected worse -- all three retailers beat Wall Street expectations for the first quarter, despite the slump."
Break out the bubbly! They soon spell it out when it comes to JCPenney:"Earlier in the day, J.C. Penney posted a 50 percent drop in net income, to $120 million, or 54 cents per share. Like the others, earnings were above Wall Street estimates, in this case 50 cents."
And then the story goes on to frame Nordstrom as a departure, the bell of the ball compared to
Macy's
(M) - Get Report
which also reported this week (See me as a
Macy's float here
):
"On Wednesday, Macy's Inc (NYSE:M - News) Chief Financial Officer Karen Hoguet said its higher-priced chain, Bloomingdale's, had a "tougher" quarter.But analyst Dan Geiman of McAdams, Wright Ragen said Nordstrom's results on Thursday were a pleasant surprise.'Quite honestly, they were much better than expected. Really, that was based on strong inventory management and strong cost control,' Geiman said. 'The take-away is they're doing what they can to control their costs and improve earnings as best they can in this environment.'"
Uh, dude, improve earnings since when? Well, recently. As in: real recently. Just two months ago, expectations for JCPenney were 76 cents. And Nordstrom, which also earned praise for surpassing by coming in at 54 cents were expected to do 60 cents just three months ago.
Still unaware (or leaving investors unaware),
Reuters
was soon forced into quite a contortion in the form of a headline that trumpeted their beat this quarter, while mentioning sheepishly that they lowered going forward. That's quite a trick, to announce lower numbers while celebrating higher numbers and only makes sense if the higher numbers weren't too meaningful. Read the headline and weep:
Nordstrom Beats View, Lowers 2008 Earnings Range
Again: how could that ever happen? Well, if this quarter's beat was not really a beat. Or a beat in name only.
What happens when you factor in such recent realities adequately?
Well, then you become
and you get The Business Press Maven's coveted "Nod of Approval" award. Moreover, you emerge with a different conclusion, one that reflects reality. Here is the headline: "Retailers, beating estimates, may not be out of the woods"
And her central point:
"But retailers are exceeding estimates partly because expectations had been sharply lowered, data show. While Wall Street had expected first-quarter profit among 30 retailers to rise an average of 6% at the start of the year, they were lowered to a decline of 6% on April 1st and as of May 15, a drop of 7%, according to Thomson Reuters."
Andria, I don't care how you spell your name. For such a basic act of good sense in the service of investors, The Business Press Maven genuflects in your general direction.
At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.
Marek Fuchs was a stockbroker for Shearson Lehman Brothers and a money manager before becoming a journalist who wrote The New York Times' "County Lines" column for six years. He also did back-up beat coverage of The New York Knicks for the paper's Sports section for two seasons and covered other professional and collegiate sports. He has contributed frequently to many of the Times' other sections, including National, Metro, Escapes, Style, Real Estate, Arts & Leisure, Travel, Money & Business, Circuits and the Op-Ed Page. For his "Business Press Maven� column on how business and finance are covered by the media, Fuchs was named best business journalist critic in the nation by the Talking Biz website at The University of North Carolina School of Journalism and Mass Communication. Fuchs is a frequent speaker on the business media, in venues ranging from National Public Radio to the annual conference of the Society of American Business Editors and Writers. Fuchs appreciates your feedback;
to send him an email.