Chico's has done it again. No, I don't mean that it reported good sales. But it did once more take an honest public posture on bad sales. The company is becoming a test case of whether honesty and a degree of plain talk are ultimately the best strategy during difficult times to avoid getting caught in your own delusions and to build a base of trust with investors rather than throw it all down a tube of jargon and false claims.
The Business Press Maven
first highlighted Chico's three months ago, nearly to the day.
While many retailers were blaming weather for their struggles, Chico's said its woeful same-store sales and slashed earnings forecast had only one cause. OK, two. Its merchandising stank, and so did its marketing.
This was a company that had delivered for a decade straight. To The Business Press Maven, its simple "my bad" language vs. "it was too hot or it wasn't hot enough" meant that it was not deceiving either itself or investors about its challenges.
Well, Chico's reported after the market's close yesterday and, in a nutshell, things didn't get much better. But there it was again, talking about how it was felled, in large part, by fashion "missteps" and "errors." Honesty can, of course, become a weird fetish. You should not get points for it indefinitely. But here -- from a company that delivered for so long -- it should buy it a temporary benefit of the doubt. At least you know that management has no "mission accomplished" delusions.
As an aside -- and before the unfavorable comparison with Pfizer -- I want to point out a good feature in a report written just after Chico's earnings release, from our own
. Chico's met its lowered estimates, as we were told, but as you know, it always grieves The Business Press Maven that we are rarely told up front whether the company last guided estimates a year ago or 27 minutes before the earnings release.
It is an important distinction, as it gives investor a clue on how well the company has a handle on what is going on and, possibly, what the most recent trends in the business have been. Well,
there we have it, right near the top and immediately after the line about consensus estimates: "The results were in line with Chico's forecast earlier this month when the company posted disappointing October sales and lowered its third-quarter earnings projections to the range of 22 cents to 25 cents a share." Music, a veritable symphony, to The Business Press Maven's ears!
Now the scratchy sound of Pfizer.
The troubled drug kingpin announced layoffs, and the implications are key. Pfizer needed to lay off about 20% of its sales force to cut costs in an increasingly challenging, patent-free environment. But the reality is, it's going to be a struggle for it to innovate and sell its way back to relevancy with a scaled-down sales force. The company's sales force was once one of its golden features.
But instead of going the Chico's route and acknowledging the obvious, Pfizer hid behind some jargon. The company spoke in a prepared statement about how these drastic cuts were an "initial step" in a "transformation strategy" when, dudes, it looks to me like you were bailing water.
It said the layoffs would "better align our sales organization to our overall customer and business needs." (Read: Who needed them with our business shrinking like we left it in a dryer a cycle too long?) Worst of all, it said the cuts would make Pfizer "a more agile and effective company."
Agile? Well, perhaps, if leaner means agile.
But effective? That is truly a misrepresentation, both to themselves and investors. The remaining salespeople are going to have to increase their workload, and whether this helps or hurts is, at best, an open question. The company might also have to create new ways of reaching doctors. This sounds a bit more like desperation than effectiveness, but true to form, there was the business media in stenographer mode. Look at
this piece from Forbes.com.
All that company jargon about initial steps, transformation, agility and effectiveness? Regurgitated back right there in the first few paragraphs, without the requisite nosehold.
It makes a Business Press Maven long for a Chico's style "we stunk up the joint."
When in Doubt, Mouth 'Merger'
Do you want to be a star of stage and screen? It's getting a lot easier, especially the screen part. Just come up with some half-baked guesswork on a potential merger -- of, say
( XMSR) -- and watch the television cameras roll.
As you know, from a big-picture perspective, The Business Press Maven has been bullish for about the past six months. But investors have to be careful, at this point, not to chase the revolting number of thinly sourced stories about potential mergers.
Things have gotten to the point of absurdity, as they were in the late 1990s when any analyst yearning for a headline could essentially custom-design one by calling a reporter to make a prediction that such-and-such-dot-com would hit $400 a share within 18 months.
Speaking of 18 months, that's the time period in which Stifel Nicolaus satellite analyst Kit Spring said on a
Sirius might gobble XM as -- ugh, has there ever been one? -- a "merger of equals."
Well, Spring doesn't actually say the merger is going to happen. You don't have to think or know that these days to have a public position. He said that there was something like a 75% chance of it being done and less than that of it being approved by regulators. Or some such. The basis for his thought? Basically: Mel does mergers.
Spring was the only one interviewed by Carl Quintanilla, who started by acknowledging talk about the merger out there in the "ether." Summed up Carl at the end: "If it happens, we'll have you back. Provocative stuff."
Indeed. Consider The Business Press Maven provoked.
A journalist with a background on Wall Street, Marek Fuchs has written the County Lines column for The New York Times for the past five years. He also contributes regular breaking news and feature stories to many of the paper's other sections, including Metro, National and Sports. Fuchs was the editor-in-chief of Fertilemind.net, a financial Web site twice named "Best of the Web" by Forbes Magazine. He was also a stockbroker with Shearson Lehman Brothers in Manhattan and a money manager. He is currently writing a chapter for a book coming out in early 2007 on a really embarrassing subject. He lives in a loud house with three children.