This column was originally published on RealMoney on July 26 at 1:20 p.m. EDT.
I need you out of shoes and into SOX. That's my takeaway after hearing still one more disappointing report out of the shoe business,
, which could still go lower even though it has a great balance sheet and a ton of cash.
Yes, the competition in footwear has gotten extreme, just at the point when the competition in SOX -- or semiconductors -- has gotten more benign. I don't mean to belabor the metaphor, but the reason
is up and Timberland is down is because one business has shockingly lean inventories -- high-end semis -- and the other has shockingly high end inventories -- high-end shoes and boots. Timberland says it has good control over its inventory. But there is too much shoe inventory overall in the system, especially at the off-price stores.
I see no end to this conundrum other than more price-cutting in the shoe biz -- that includes
, Timberland and
-- and more steady pricing in semis.
Don't get me wrong, we won't see price increases in semis -- that's not the style of that industry. But I come away shaking my head about how the shoe market, which had been in full bull mode for a couple of years, now seems to be distinctly bearish. That's because of a combination of higher sourcing costs -- that pesky Yuan -- and a bunch of price points that have gotten too high for America's consumers.
Meanwhile, semiconductor pricing is as strong as I can remember it. No wonder Texas Instruments bought back billions of dollars in stock this spring, 7 points ago. With these lean inventories, pricing could be good for the rest of the year.
, into SOX. Now, that makes sense for this market.
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