Sunday, May 15, 2016

Advice For Dinosaur Retailers

Stop breeding, and try to put on some weight, it's going to get colder soon:
 The combination of slower in-store sales growth, an increase in less-profitable online sales, and steady spending on stores has made it harder for many retailers to maintain healthy profit margins. Stock prices are responding accordingly.  
But but but...  I thought online sales were riskless, easy, fantastic profits.. a no brainer.
E-commerce sales, not physical stores, are driving a bigger portion of retailers' year-over-year sales growth at established stores
Here we go again... measuring from a truly insignificant amount to a merely insignificant amount, using words like "bigger" and "growth." 
America has more retail square footage than Australia, the U.K., Germany and Mexico combined
Because USA is a consumeristic society, and those are materialistic societies.  We buy junk and throw it away, they buy quality and keep it.  That our poor are fat is an example of the difference.  It takes far more retail infrastructure to serve a consumeristic society than a materialistic one.

Ungh... ROIC?  A rent-seekers metric if ever there was one.
One way for investors to figure out which companies are following Home Depot's example and keeping a lid on unproductive store growth is by watching a company's return on invested capital (ROIC), a metric Gutman figures has a 90 percent correlation with stock performance at the retailers he follows. The idea is that the better a retailer deploys its capital, the higher its stock price tends to go. 
This assumes the point of retail is to make money for investors, not serve customers.  Any surprise they are dying?
Dick's Sporting Goods, ... 7 percent increase in square footage from 2013 to 2015 and 1.5 percent decline in sales per square foot (when excluding e-commerce sales) during that time. With Sport's Authority's bankruptcy and impending store closures, Dick's is eager to pick up some of its competitor's locations. That could help boost short-term sales, but comes with diminishing returns, as mounting competition squeezes specialty athletic gear retailers.
A better plan for Dick's and other struggling retailers might be to focus on how to make their existing stores better. 
Dinosaurs had plenty to eat toward the end, with so many dinosaur carcasses to cannibalize. A better plan for you is to open a sporting goods store near where a Dick's or Sports Authority closes and offer the materialistic customers what they want.  There will be enough business to discover in that vacuum to support a lifestyle.  For the next 40 years accumulation will be confiscated, necessarily so. 

Feel free to forward this by email to three of your friends.


Anonymous said...

"That our poor are fat is an example of the difference." We in the US can afford to be fat. The commoner in countries like Nicaragua, Kenya, Colombia, or Sri Lanka must spend their low disposable income shrewdly and weigh between something of quality that lasts or something that can be thrown away once it breaks down. This often means going without a car and walking, bicycling, or taking public transportation to get somewhere thus more exercise.