Friday, January 13, 2017

Clearance Bin

Clearance Bin

You ever go to Wal Mart?  They always have a clearance bin of DVDs.  They are like $5 apiece, but they are typically "straight to video" type movies.  I sometimes dig through them, but it is a rare day I find something I'm willing to spend even $5 on.

Well, I have a new clearance bin.  It is called retail stocks.  I have officially had it with them.  I own two right now, GME and GNC.  I did have BKE earlier this year and it wasn't pretty, nor were GME and GNC.  I mean these companies, their numbers are not just bad, they are abysmal. I walked through a Gamestop store Christmas Eve.  It was not busy. It was not well organized. It had no appeal.  I was not the only one who thought so. They announced today their same store sales for the holiday season - down 18.7%!  How is that even possible?

BKE has not been much better. I have not gone into one of them. Their December SSS were down 15.5%.  I read an interesting observation by Warren Buffett, who said Sears would never turnaround back in 2005 (you could say the same about JCP or VNCE) - "once a retailer starts going down, they never recover."  He said he could not think of a single example.  A failing retailer may retain customers, but they do not attract new customers.

Anyway, I wash my hands of retail.  I will have to decide what to do when using my formula if I have more than one retailer on the list. I suppose discard the one in the greater death spiral.  I never liked any of the $5 DVDs and I do not think I'll like the bargain bin retail stocks.

1 comment:

jb said...

Interesting post. It definitely does seem like retail is in a secular decline and I've been thinking of dumping retail stocks out of my MFI selections too. At the very least I personally am seriously considering limiting the number of retailers to only one stock out of 40. It seems the only retailers that really have a chance at this point are not likely to ever show up on any MFI screen in the near future. So completely eliminating that sector would probably serve me best, instead of trying to pick the best out of the pile that might show up in the screen.