Last week retailers spooked the market with earnings misses and extreme near-term caution, reflecting an economy of uncertainty, higher taxes, and slow to retreating incomes. As proxies for the economy, the news helped send major equity indices to their worst weekly performance of the year, setting up this week's results from the sector as critical to the overall market and maybe influential to monetary policy, too. But there are additional narratives when it comes to retailers ... they represent the grit of management and employees a proxy for people and determination.
There are three pivotal names for a variety of reasons leading retailers higher this morning. One as a proxy for the housing recovery, another one is the story of redemption and resolve on how to deal in a hostile environment, and the last one is about staying cool in a niche where cool is always a moving target.
Home Depot (HD)
Sales $22.5 billion
Comparable Store 10.7%
Comparable Store (US) +11.4%
Net $1.8 billion
FY13 GuidanceSales +4.5%
Comparable +6.0% (previous +4.0%)
Best Buy (BBY)
Sale $9.3 billion
Same Store (0.4%) from (1.6%)
Gross Margin 26.5% from 24.2%
Gross Margin (domestic) 27.5% from 24.3%
Operating Margin 4.4% from 0.9%
Operating Margin (domestic) 5.4% from 1.1%
Earnings from continuing operations $0.69 from $0.09
Mobile phones were 49% of revenue from 45%
Less discounting, more mobile phones have given the company momentum.
Urban Outfitters (URBN)
The company posted record numbers driven in large part by newer store brands.
Revenue $758.5 million +12.2%
Urban Outfitters $315.1 million +8.3%
Anthropologie $315.1 million +11.8%
Free People $97.2 million +31.8%
Last year there were arguments over whether businesses were people, and some argued no because a business couldn't give a blood transfusion. Well, businesses are people- the people that work for them, the people that use the products and services, and the people who go to college because a parent has a job. Businesses galvanize workers when it's time to survive and shock the world when they climb off the canvas. This morning BBY will open 200% higher than its 52-week low-the company was supposed to be a loser to both brick and mortar (read Wal-Mart) and the internet (read Amazon).
The same could be said for Game Stop (GME), which got another upgrade this morning and a share price target of $60.00.
Competition makes this all happen, and we the public, or the people, are beneficiaries of the resolve of people to be the best and overcome odds and obstacles. The economy is chugging along well below its potential as a new reality of life under the current administration polices and goals. Greatness isn't a goal but an expanded middle class of sameness that belies the DNA of America and the day to day fight businesses face each day. But, this is still a $16.0 trillion economy, and there will be winners and losers-it's the real world, it's the world in which real people toil and strive and occasionally defy the odds.
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