Almost all big retailers missed this year, and with the huge discounting and all out price wars ragging for market share it's to be expected. So WM ended up on the short end of the stick just like everyone else, and is only news for those who didn't want to believe WM would miss too.
if lucky AMZN might be able to ship just 40 TV's using the lowest cost shipping that can be found for the same amount of money, and they still have the cost of getting them to their distribution center! This is why AMZN is looking to raise the price of Prim membership, and they are building distribution centers all over the country, to reduce shipping expenses because it is killing their profits.
On the other had BBY's online sales have inherently lower shipping costs because they are using the local stores as mini distribution centers, and use the delivery infrastructure they already had in place for the stores. The same stores all the pro online analyst keep saying are BBY's boat anchor.
Lastly don't forget, by having a physical presence, BBY can sell highly profitable services. AMZN could sell them too, but that would require them to either open offices all over the country, or subcontract the work out and take a small cut of the profit. On the other hand BBY's huge stores have plenty of room for techs to work out of, so additional offices are not needed, and BBY doesn't have to share the profits.
To sum it up, BBY big stores have a lot of value beyond being a shopping venue. They act as an advertisement tool for BBY that would be very costly to replace, and one AMZN spends huge amounts of money to counter for its lack of physical presence. They serve as mini distribution centers for online sales giving BBY a cost advantage over AMZN on shipping costs. They provide a home for BBY techs to work out of on highly profitable services, something AMZN will likely never have. Also lately BBY has gotten manufactures to rent out space in their stores, once again showing they have a lot more value than is being credited to them. Fact is being an online only retailer has advantages, but also disadvantages as well, and when all things are considered the preconceived cost advantage for a major online retailer like AMZN might be more illusion than reality.
In theory online retailers should have huge costs savings over a B&M (brick and mortar store), but does a one like AMZN really enjoy that cost benefit? We have been told over and over again that online retailers enjoy huge costs savings, but do they?
Everyone of course points out to BBY's massive stores as being proof online retailers have lower costs, but do any of them give credit of there value for brand awareness and presence? No, because that would mean they have more value than just a shopping venue, and maybe for a company like BBY not an unwise expense.
Fact is most BBY stores are right off major roads and highways, and are seen by millions of drivers daily, those big blue stores scream out to drivers we are here, and remind them over and over again BBY is there. On the other hand what does AMZ have to remind people it is here, and open for business? Nothing in the real world from their operations, so they have rely almost totally on advertising to ;k make their presence known and seen. They could rent some billboards on the side of the road, but one on a major road inside a city will easily cost you over 20K a month, and every BBY store acts just like one as a side benefit that no analyst values. Yet it represents a advertising benefit that would cost a huge amount of money to replace, so maybe all those stores are not the boat anchors the pro online analyst make them out to be.
The truth is AMZN has to spend huge amounts of money on advertising to feed the AMZN machine. Go to any search engine and type a model number of something and an add for AMZN will pop up with that item in it. This is not cheap, and drains away a huge amount of the claimed AMZN cost advantage.
On top of that we have huge shipping cost disparities between BBY and AMZN. For about 2K you can have a whole tractor trailer full of goods shipped to a BBY store which has several hundred of TV's in it, if lucky AMZN might be
Last Q BBY matched all major competitors prices, so if someone walked into a BBY to look at TV model 1234XZ, checked the price on AMZN and found it was cheaper the BBY's price, all they had to do is show it to a BBY sales rep and they would match it. I the past a lot of those people would go home and order it off of AMZN, but with BBY matching the price why bother when you can have it in the trunk of your car in 15 minutes heading home with it?
Sentiment: Strong Sell
I really have to question if they did that, as to why next Q they are expecting a loss, or has the AMZ machine become so large it can only profit during the holiday season? If it is the latter AMZN will never deliver the profits AMZN investors have have been dreaming of. At least this time AMZN investors don't look like they are going to let AMZN get off Scott free like they have in the past.
Considering how far BBY fell, I would have expected at least a good dead cat bounce, but instead best we got was a slight qiver. I have been thinking BBY is a hold, but they way the stock is acting I am changing that to a sell, as that is the direction the market is taking this stock.
This last quarter was one of cut throat pricing made even worse from the ever declining selling prices of CE (consumer electronics). Yet BBY's drop in revenues was almost nil in comparison to the eroding product pricing in the CE industry. It is clear to me they had to have sold more CE units than ever to have come so close to last year revenues, and should report those number with earnings.
The fact is AMZON price is based on its revenues, not on its earnings, for if it was it might be a thirty dollar stock. I think BBY to be fairly priced needs to show investors unit sales numbers, and market share. A lot of companies that research market share say BBY gained it this year, so BBY management should make that clear during earnings along with unit sales which I am confident increased in the double digits.
So BBY longs, do your self a favor and tell BBY management you want unit sale comps and market share numbers in its earnings report. As I suspect when they are viewed and the whole picture is seen BBY really had a great quarter when all the adverse factors are factored in.
Today they post two articles on BBY, one that says BBY is toast, and the other the results where not that bad, and is just a setback in its recovery. To me the Fool looks like it is the Fool, as BBY can't be both dead and alive and kicking at the same time.
It is clear to me the markets reaction was an over reaction, but the valuation placed on BBY while it was still working on it recovery was over the top. They highest BBY ever got was about 55, and they had it up to almost 45, that's about 82% of the highest valuation of BBY stock in its history! When it was raking in tons of cash with no clouds in sight, and people were paying that with huge dark clouds ahead betting on a major recovery in a weak economy, that's bonkers.
In the mean time AMZN is around 400, with almost no earnings, is another investor trap. What good is a company with revenues of 70B when they hardly make any money? The fact is it is real easy to to have massive gains in revenue when you dump product out the door at prices that barely cover your costs like they do. Also I wonder how paying sales taxes and all these new regional warehouses they are putting in place is going to impact the bottom line? Also one has to ask why are they doing it? I know why, BBY has shown that a Brick & Mortar store can compete with them on price and survive. So now AMZN must now match the have it now experience BBY offers if it is to compete against BBY in the future. As don't be shocked if in the near future AMZN anounces the opening of AMZN show rooms to keep customers out of BBY stores since they know once there BBY will match prices and take the sale.
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It's hard to say, I made good money shorting BBY, but now that it is around what I feel is fair market value and thinking of going long again in it. I would wait a few more days for things to stabilize before starting to go long in this stock.
I am feeling the squeeze of jucy short profits, now run it up again with BS expectations and I will short it again. Get real, until the endless price wars and discounting come to an end, BBY will have to fight for every dollar it takes in.
They warned price matching was going to hurt, and it did, and just a few percent of lower prices by price matching is all it took to cause them to miss expectations. The honest truth is I expected worse results than this. It hurt BBY, but not enough to bring them to their knees although it caused its stock to be pounded. The fact is BBY stock rose on unreal expectations, and it getting a pounding for it, when in reality when you look at all the adverse issues they had to deal with, they didn't do that bad.
Made a nice proffit, might have made more by holding on, I really don't think that news was that bad, or unexpected. Might even go long once the blood stops running, and after I get a better picture of overall of who BBY did last quarter.
Would not be surprised to see BBY under thirty by before the end of summer. After earnings which look like will show BBY moved a tons of producte at low margins BBY stock will likely skid downwards until start of fall, and another year of hoping BBY scores big on the holiday shopping season. Alot of retail stocks do this too, and I expect almost all retail stocks to do the same thing and show little life for the next 6 to 8 months.
Sentiment: Strong Sell
While those long BBY are betting on a turnaround in the meantime Conn's is posting solid earnings growth that BBY in it's best days couldn't match. If this was a car race and you were allowed to place a bet half way though the race, would you want to put the money on a car down 5 laps and hope it can catch up, or put it on the leader? BBY is down 5 laps and Conn's is why out in front of the pack leading the race. Now place your bets.
Sentiment: Strong Sell