Give the business media a suitable amount of space and they can sometimes hit their target. But when they summarize an earnings report in a more limited amount of room, they often miss. Big time.
The basic gist on
, the upscale-downscale retailer, which reported yesterday, stands at this: Considering the economic climate, the company actually did all right, or at least kind of flattish -- once you realize that a good deal of its apparent trouble came from their credit card division.
The credit card division, of course, can't be magically discounted as a factor, and there is obviously some interconnectedness between the store and the credit card division. But if you realize that in no uncertain terms income from credit cards was down something on the order of $150 million, guess what?
You'll know that a good level of Target's trouble came from struggling customers who aren't paying off their cards, which is not good -- but it's a whole lot better than more-substantive trouble in merchandising. In fact, that the credit card trouble detracted from earnings means that the profitability of Target's merchandising (a more lasting and important variable) is better than indicated.
In most of the longer-form writing on Target yesterday, the business media made this relatively clear to investors. But in the shorter summary articles, it was lost to the wind. With less space, the business media can't be expected to catalog every important detail. But this was a biggie. It's important for the savvy investor to realize that when it comes to shorter-form work by the business media, reader beware.
The Wall Street Journal
, representative of much of the longer-form work, credit card trouble was the
to explain why net income fell: "Discount retailer Target Corp. will curb store expansion and tighten credit-card terms after reporting fiscal-second-quarter net income fell 7.6% because of credit-card write-offs and weak sales."
Even better, the
then devoted the next four paragraphs to credit card receivables, before making clear what worked: "Target has successfully managed inventories and labor expense controls to avoid profit-sapping mark downs and expenses, Gregg Steinhafel, chief executive, told investors Tuesday. Retail gross margin, a measure of profitability, rose slightly in most areas, he said."
Compare this with the work of another Dow Jones publication,
. It ran a
yesterday on Target's earnings -- and if a savvy investor read only that one paragraph, guess what? He wouldn't have heard word one about the credit card trouble.
Notice, though, how when a big factor is left on the cutting room floor, the smaller article does not quite add up. The second sentence refers to Target's "dreary fortunes," and in the third sentence, we are told that the company "did a pretty good job of managing its operations."
Uh, how can that happen? Only if a bunch of the weakness came from credit cards -- not the racks of goods -- but
doesn't mention it, confusing savvy investors.
Beware and be aware of the limitations of shorter articles to get at slightly subtle but important factors in earnings reports. And if you are reading along and it doesn't seem like things add up -- with talk of dreariness right next to talk of good -- you're probably right. Things don't add up.
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;
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