Tuesday, May 27, 2014

"Central Problem of Retail Merchandising"

Continuing the distressed retailer discussion,

"The central problem of retail merchandising is to extract the maximum dollars per square foot per year. There has to be a genius who selects an attractive, mutually-reinforcing product line-up, a genius who designs a clean, comfortable, well-lighted store, a genius who manages the supply chain, getting the right stuff in the right display space at the right tim of year at the right price and then marking it down the right amount at the right time to free the space for the next season. Sears used to be a genius at this. Now, it doesn't understand any of it. The difference is that the upper management doesn't know what a store is."


John said...

Thanks for posting. There are some real gems in this short paragraph.

CP said...

Author of http://www.portfolio14.com/ !

I like your blog.

By the way, Horace Dediu is the best argument against owning Apple.

John said...


Don't get your logic regarding Horace Dediu. Care to elaborate?

CP said...

Just the fact that there's a guy out there beating the Apple financial statements to death with 100k followers watching. How could it be underpriced?

John said...

Right. I see your point.

#followers <> $position

Besides, I really dunno whether these 100k odd bulls are facing 100m bears or 10k bears.

Time will tell. :-)

CP said...

I wonder if HD knows whether he's running the company or analyzing it?

John said...

Well, he profits from what he's doing. Incentive is a very powerful thing.

CP said...

Yeah, but he profits because people are inordinately interested in reading about it.

Remember there was no Horace Deidu of CNRD when we bought it.

John said...


Most of the finance news add no value.

CP said...

People look at the wrong stuff. Our gain.

They watch NBA basketball and Jim Cramer!

James said...

This guy makes some interesting points about retail:
Why Guy Spier Will Never Invest in Retail

I've always had the same impression as him, i.e. that retailing is a tough business where few of the players have a durable competitive advantage. A lot of retail CEOs who are successful at one retailer seem to flounder when they move to another retailer operating in a different market segment/environment.

CP said...

James, great video/comment. I'm going to post that on the blog.

Steve Sailer said...

But there can be a lot of ruin in a retailer. I worked for a manufacturer in 1979 who pointed out that the local Sears were turning into dumps. When I dealt with Walmart in 1991 Sears was clearly outclassed. But 23 years later it's still around.

CP said...

Sears has the advantage of owned real estate or at least very low cost long term leases. That makes a big difference in the business and also in the cost of financing - two advantages that RSH doesn't have.

We will get to see the RSH financial situation as of March 31 this week, but at yearend 2013, the quick ratio was 0.9x.

The company had -$190 million in CFO and investment in Q4, offset by $84 million in borrowing.


Will be very interesting to see what their cash position was at the end of Q1.