NBR Transcripts-November 11, 2009
Wednesday, November 11, 2009Retailers Hope To Ring in Holiday Sales From Cyberspace
SUSIE GHARIB: On this Veterans Day, retailers across the country are focused on another holiday: Christmas. With only 43 shopping days left, there are mixed reports on how much consumers will open their wallets this holiday season. Macy's stock tumbled more than 8 percent today after reporting a quarterly loss and delivering a cautious outlook for the holidays. Now the focus is on Wal-Mart. The giant retailer reports its quarterly numbers tomorrow morning. But there is one bright spot on the retail landscape: the web. As Erika Miller reports, online purchases are expected to capture a bigger share of holiday sales this year.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: This browser is being replaced increasingly by this browser. Retail expert Britt Beemer says there has been a shift in the way Americans shop.
BRITT BEEMER, CEO, AMERICA 'S RESEARCH GROUP: When you look at the consumer today, particularly the American female -- browsing is almost an art that has gone away because people haven't got time to spend money. They haven't got time to waste time and there is not anybody to help them in the stores.
MILLER: Put another way, Internet retailers have been gaining competitive advantages over bricks and mortar stores. Forrester research analyst Patti Freeman Evans says it's easier to compare prices online.
PATTI FREEMAN EVANS, RETAIL EXPERT, FORRESTER RESEARCH: The economic environment is a bit of a catalyst to people shopping online. They're very conservative. They're planful. So they are actually researching their purchases more. And online is a really, really good place to do that.
MILLER: But people are not just researching and browsing, they're also buying. Forrester predicts Internet retailers will see 8 percent sales growth this holiday season compared to last year. That comes as retail sales overall are expected to decline. Many retailers are playing to their strengths, putting their best deals on their web sites and enhancing offers with free shipping. But price is not the only advantage for web retailers.
EVANS: They can be more flexible and change things on their web site -- or products on their web site at the drop of a hat. Whereas an offline store may have cases and cases of inventory that they actually have to move. So the online environment is very, very quick to change.
MILLER: But Internet sales represent only about 7 percent of total holiday sales, according to Forrester. Some think it's even lower. The Monday after Thanksgiving is called cyber Monday, because it is usually the biggest online sales day of the year. But this year December 17 could also be big. That's when 500 retailers are expected to participate in a free shipping day that guarantees delivery by Christmas Eve. Erika Miller, NIGHTLY BUSINESS REPORT, New York.
One on One with Dana Telsey of Telsey Advisory Group
SUSIE GHARIB: Joining us now with more analysis of the retail sector, Dana Telsey, CEO of her own research firm, the Telsey Advisory Group. Hi, Dana, nice to see you.
DANA TELSEY, CEO, TELSEY ADVISORY GROUP: Nice to see you too, good evening.
GHARIB: Dana, let's start off in just getting your overall prediction for holiday sales.
TELSEY: I think holiday sales for 2009 will be a profitable season. I think sales will be flat with a slight upward bias. I think we're seeing retailers priced very competitively. Inventory levels are lean and comparisons are very easy.
GHARIB: We've been hearing a little anecdotal stuff about how luxury sales are picking up. Could the luxury market, luxury retailers lift it for all retailers, lift the numbers?
TELSEY: I don't know if they lift it for all the retailers, but certainly we are seeing improving trends in luxury goods. We saw the biggest declines in luxury goods last year in the fourth quarter compared to many of the other retail segments. So some of the companies having been down 30 percent, there certainly is a rebound happening and even their opening price points have gotten sharper this year than they were last year.
GHARIB: Dana, tell us about your expectations for Wal-Mart tomorrow, not only on earnings but also will it be the big winner this holiday season in terms of sales?
TELSEY: Certainly what we're seeing out of Wal-Mart so far, they're being aggressive in terms of being all about price, for holiday 2009. They're going to have a better growth margin. I think they're being competitive on the expenses and overall we're looking for them to generate a slight increase in same store sales in the third quarter, just a little bit less than a half a percent type of increase. A nothing better than that could certainly show some share gains.
GHARIB: We're hearing from a lot of retailers, not just Wal-Mart, about special discounts, longer hours, other gimmicks. Is this what's going to separate the winners from the losers this season?
TELSEY: I think you're going to see retail try everything they can to get customers to shop early. I think their inventories are light and the closer you get to December 25 a lot of times the bigger the markdown. Markdowns this year can't be as big as last year because retailers just don't have the inventory. But it's always a more profitable sale at a full price than it is at a markdown price.
GHARIB: Dana, I'd like to get your analysis on Macy's. It's said that its store sales were down, but its online sales surged. Is it doing better than we think?
TELSEY: I think what we're seeing out of Macy's so far is given the combination with the mine Macy's initiative, where you had 1600 employees all located into new jobs, the fact that they're seeing an improvement in their same store sales trends should certainly be seen as a positive. The competitive environment and the exclusive product that they've put in place is leading to higher margins so I think, overall the trend of Macy's is showing improvement. Always Wall Street sometimes wants more than what these companies deliver at a particular point in time.
GHARIB: Tomorrow besides the Wal-Mart earnings, we're also going to hear from Nordstrom and Kohl's. What are your expectations there?
TELSEY: I think for Kohl's overall we are looking for an improvement in their guidance for the fourth quarter and for the year. For Nordstrom what we expect to see is continued improvement in their gross margin. For Nordstrom what we expect to see is continuing improvement in their growth margin. I think for Nordstrom the rack business will be one of the key drivers as that's where the square footage growth is coming from. I think what we're going to see out of Kohl's, a lot of their exclusive product lines. I think there could be some more square footage growth there too. So for both of those reports I think we could see the luxury goods and high end aspect of Nordstrom's leading to some improvement.
GHARIB: Finally, I know you spend a lot of time walking through stores, talking to shoppers. What are you hearing? What's the mind set of the consumer?
TELSEY: I think the mind set of the consumer is, it's been like this for almost a year now, I need to replenish and replace and if it's at the right price I'm going to open my wallet and buy. But it's more for basics than for novelty. Show me the price, show me the quality and I'll open my wallet. I think that's the theme.
GHARIB: It's all about the price. Dana, thanks a lot. Appreciate your being on the program. My guest tonight, Dana Telsey of the Telsey Advisory Group.
"Street Critique"-Hilary Kramer, Chief Market Strategist at A&G Capital
PAUL KANGAS: Tonight's "Street Critique" guest sees gold heading to $1,400 an ounce. She's Hilary Kramer, chief market strategist at A&G Capital Research. Hilary, welcome back.
HILARY KRAMER, CHIEF INVESTMENT OFFICER, A&G CAPITAL RESEARCH: Paul, thank you. It's a pleasure to be here.
KANGAS: A year ago in your 2009 predictions you said gold would make a comeback on the weak U.S. dollar. That's exactly what's happened. Do you think goal is still a good hedge against the market and economic uncertainities?
KRAMER: Paul, absolutely. Gold is an essential part of everyone's portfolio right now. Because the U.S. dollar continued to decrease in value and that will be the case as long as our government continues to spend and spend, somewhat inefficiently, although it has taken us out of the recession. And so you have this relationship. Dollar drops and investors all over the world, out of the U.S. especially, go for gold.
KANGAS: OK, now, despite that rather defensive status, what about stocks? I mean we're headed higher from the March low, still going higher. Should investors take profits here?
KRAMER: I believe investors should be very disciplined and make sure to take some money off the table, especially if you happen to invest in the first quarter of 2009 and you have gains that could be 20 to 50 percent. Have discipline and don't be led by your greed. We invest by fear and by greed. 2008 was about fear. This is the year of greed. Be careful.
KANGAS: Do you still see buying opportunities anywhere in the market?
KRAMER: I absolutely do, Paul. The financial institutions, go where the money is. Invest in the companies that are doing really well and that have the edge, and in this case it's banks. For example, Morgan Stanley, the symbol is MS. Morgan Stanley, the a stock I own because Morgan Stanley doesn't have the competition they did a year ago. There's no more Bear Stearns, no more Lehman Brothers and they are making a transition to a new CEO and I think we'll see Morgan Stanley make its way up to $50 a share in the next 18 months. Now, another stock that I like that I've spoken about all the way up as it's heading toward $200 is Goldman Sachs, symbol is GS. The best talent on the Street, great investors and Goldman Sachs got out their used money when we were at the bottom of the market and they're going to be reaping the benefits for years to come on some of these cheap, cheap bargains that they were able to pick up. And the last financial institution that I love is Blackstone. Ticker symbol is BX on Blackstone. Blackstone is in the $15 range right now, a private equity investor publicly traded and now that the equity markets are open, they're going to be able to make some money on the investments that they've made buying companies over the past years.
KANGAS: We just have 30 seconds left. Any other stock that you would recommend?
KRAMER: Apple (AAPL). Apple is a terrific company to own, going into the holiday season, they're going to surprise us on the up side. It's a hot stock, it's a trendy company. There's quality there. And just look around, everybody likes the Apple products with their iPhones, iPods, and that's one to own and put in your portfolio.
KANGAS: I guess that's the reason why the chart looks just like it looks, very strong. OK.
KRAMER: And it will stay that way.
KANGAS: Hilary, do you own any of the stocks mentioned here or have other disclosures?
KRAMER: Morgan Stanley, MS, I own Morgan Stanley. That's my proxy for owning Wall Street.
KANGAS: OK, Hilary, thank you for sharing your insights with us once again.
KRAMER: Thank you, Paul.
KANGAS: My guest Hilary Kramer of A&G Capital Research.
"Money File"-Buying Foreclosures
SUSIE GHARIB: In the "Money File" tonight, the dos and don'ts of buying foreclosures. Here's John Simons, senior personal finance editor at Black Enterprise.
JOHN SIMONS, SR. PERSONAL FINANCE EDITOR, BLACK ENTERPRISE: Though the economy appears to be in recovery, the home foreclosure crisis is far from over. Last summer, more than a million homeowners received a foreclosure notice in the mail. Mortgage defaults are expected to rise next year. These statistics, though painful for stressed-out homeowners, spell opportunity for prospective buyers. During July, August and September of this year, roughly a third of homes sold in the U.S. were foreclosures. In some cases, foreclosed homes sell for 70 percent less than the previous owner paid. That sounds like a great deal and it is. But buying a foreclosed property presents unique challenges. These transactions take much longer than a traditional real estate sale. At Black Enterprise, we still believe in home ownership as a foundation for building wealth. But when it comes to buying your dream house in a foreclosure sale, we recommend first that you work with a realtor who has experience with distressed properties. You need an agent who has the patience and wherewithal to guide you. Next, don't shop on price alone. The cheapest properties often present the biggest headaches. Look for homes where the previous owner has already moved away to avoid legal wrangling and messy evictions. Immediately after you make an offer, hire several inspectors to take a thorough look at the home. Avoid neighborhoods with high concentrations of foreclosures. And last, don't get into aggressive bidding wars over these properties. There's plenty to go around. I'm John Simons.
"Last Word"-Hire a Veteran
SUSIE GHARIB: And finally on this Veterans Day, for young veterans returning from Iraq and Afghanistan, the unemployment rate is over 14 percent, much worse than the national jobless number. Now the Obama administration is pledging to help. In a memorial service at Arlington National Cemetery today, the president said he will do right by them. He signed an executive order creating the Council on Veterans' Employment. Its goal: encouraging Federal agencies to recruit and train military veterans. But it's not a problem the government can alone fix. So this Veterans Day, don't just thank a vet, hire one. Right, Paul?
KANGAS: Hire as many as you possibly can afford.
GHARIB: That's absolutely a good policy.
Paul Kangas' Stocks in the News
PAUL KANGAS: Stocks on Wall Street opened with solid gains amid growing investor confidence. That confidence was boosted by comments from Fed officials repeating the central bank's pledge to keep rates low for an extended time. An hour into trading, the Dow gained 82 points with the NASDAQ up 24 points. Volume was light as government offices, banks and the bond market were closed for Veteran's Day, so that early rally lost its momentum. Even so, the market did end higher across the board. The Dow closed up 44.29 at 10,291.26. That's its third straight yearly high. The NASDAQ Composite up 15.82 at 2,166.90. Standard & Poor's 500 Index added exactly 5.50 points to close at 1,098.51.
Big board volume leader on now that much volume for Citigroup (C), 41.3 million shares and the stock lost $0.02.
Followed by Bank of America (BAC) with a $0.40 gain.
Then Motorola (MOT) down $0.08.
General Electric (GE) a nickel gain.
And Ambac Financial (ABK) edged a penny higher.
Ford Motor Co (F) a $0.09 gainer.
But a big loser was Macy's (M) off $1.57. The company had a second quarter loss of $0.03 a share out today, not as bad as last year's $0.08 per share loss. But the company says its fourth quarter same store sales will drop 1 to 2 percent and it sees fourth quarter earnings at a lower than expected $1 to $1.06. Street estimate is up there at $1.11.
Let's see some of the other retailers. Wal-Mart Stores (WMT) as you heard, earnings due out tomorrow, up $0.66.
Kohl's (KSS) earnings due out tomorrow, down $1.77 today.
And JCPenney (JCP) off $1.28. JCPenney's earnings are due out Friday.
Getting back to the active list, Pfizer (PFE) up $0.06.
And then JPMorgan Chase (JPM) $0.15 gain.
Synovus Financial (SNV) $0.18 loss, tenth in big board volume.
Hewlett-Packard (HPQ) closed up $0.04. As you heard, it's acquiring 3Com for $7.90 a share. 3Com jumped over $2 to about $7.70 in after hours trading. Also today after the close, Hewlett-Packard reported preliminary fourth quarter earnings of $1.14. That's $0.02 above the Street estimate and the company also gave an upbeat outlook. In after hours trading, Hewlett-Packard stock was up $1 from the price you see there.
Toll Brothers (TOL) the home builder, had a great day, up $3.0.2. A lot of good news. It reported its fourth quarter signed contracts up 42 percent from a year ago and that's up 62 percent in terms of dollars. The company also had fewer fourth quarter cancellations and its deliveries were above the company's guidance. Standard & Poor's today repeated a "strong buy" on Toll Brothers stock.
American International Group (AIG) down $0.84. CEO Robert Benmosche told the board he's considering stepping down after just three months. He cited too much government interference, causing frustration. But later today, he came back and countered all that and said he's totally committed to staying on the job with AIG.
Prudential Financial (PRU) up $1.28. The company declared its 2009 common stock dividend at $0.70 a share. That's 21 percent more than the 2008 pay out.
Semiconductor Manufacturing (SMI), look at that percentage gain, up 60 percent with a gain of nearly $1.50. The company settled a lawsuit with Taiwan Semiconductor and that could result in Taiwan taking a 10 percent stake in Semiconductor Manufacturing.
Flowers Foods (FLO) down $1.41, $0.34 in third quarter earnings, up from $0.29 last year, but the company sees its full year at $1.40 at best and the Wall Street estimate is $1.43, down went the stock.
Cytec (CYT) a chemical company, off $1.29. Goldman Sachs issued a "sell" recommendation.
Apple (AAPL) topped the active list on NASDAQ, moving up $0.27.
Research in Motion (RIMM) up $1.05.
Microsoft (MSFT) up $0.11. You heard the story about its new Bing search engine.
Google (GOOG) up $3.80.
Intel (INTC) $0.34 gain there.
Amazon.com (AMZN) lost $0.24.
Cisco Systems (CSCO) $0.27 advance.
Baidu (BIDU) up $2.39.
Priceline.com (PCLN) which rose over $30 yesterday on great earnings, down $7.42, a little profit taking today.
And then came Qualcomm (QCOM) with a $0.31 gain.
And finally, shares in Clearwire (CLWR) fell $1.11 after posting a third quarter loss of $0.43 per share.
