Windows Of Opportunity
By Steve Smith -- TWICE, 3/10/2008
This is the type of economic atmosphere that if you see a publicly held retailer or manufacturer report flat sales and a reduced loss, it becomes a moral victory.
Take a look at recently released fiscal year and fiscal Q4 results for many of the publicly held retailers in the industry. At best, they look like a mixed bag across all categories.
Lowe's and The Home Depot both reported lower fiscal fourth-quarter earnings; Dell's fourth-quarter income fell; Staples reported record fiscal year sales, but lower comp store sales and slightly lower earnings; Office Depot had lower Q4 and annual sales and earnings; and RadioShack posted strong annual and Q4 earnings, but overall sales and comp-store sales were down.
The one company that took more of a beating than many is Sears Holdings. Net and operating income were both off over 40 percent, with net and comp sales down in the single digits. If the big guys are taking punishment, it would be logical to assume that the smaller guys would be on the ropes too. But you'd be wrong.
Even in times like these there are windows of opportunity. And usually entrepreneurs see them first.
This is what senior editor Alan Wolf saw at last week's Nationwide Marketing Group meeting in Dallas (see p. 1). That group's independent retailers see opportunities in the marketplace. The activity on the show floor where independents were ready, willing and able to buy, was in stark contrast to mixed and gloomy financials that were just released.
Granted, Nationwide's Ed Kelly and Robert Weisner may have spiked the Kool-Aid or hypnotized their members at the show, but I doubt it. Their members are upbeat because they are seeing more consumers turn to the sales and service expertise at their stores, at the expense of Sears and other national chains, specifically in major appliances.
Most of these independents run family-owned businesses and are entrepreneurs — first-, second- or third-generation variety. They benefited a few years ago when Circuit City dropped major appliances and its commissioned sales force. Now they say they are benefiting from Sears' problems.
While Nationwide is a mammoth buying group of 3,000 members and $11 billion in appliance, electronics and home furnishings sales (give or take a billion, because it isn't a publicly held company), we will see in the weeks to come what Brand Source, HTSA and PRO Group, have to say when they hold their spring conventions and report on how they survived the first quarter, and discuss what their prospects are for the rest of the year.
Speaking of entrepreneurs, it takes one with a lot of chutzpah like Mark Wattles, owner of Ultimate Electronics and investor in a national competitor, Circuit City, to try and replace five of the Richmond, Va.-based chain's board members with only 6.5 percent ownership of Circuit's common stock.
He tried and failed last year doing this with Tweeter. Why is he doing it now with Circuit City? How will this play out? During a difficult year finding out what Wattles is up to will be, at least, entertaining. But it will be a distraction for Circuit City's management and board as they try to turn the chain around.
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