![]() Here are two retail winners with a discussion of their stock prices, results, and growth strategies. Two retail winners reported better than expected sales and profits, and raised their guidance.Įach of them share common traits: They target consumers who are eager to spend and they compete for market share through effective strategies featuring great products and tightly managed operations. Investors reward companies that exceed expectations. In my view, the winners will be companies with effective strategies that serve consumers eager to spend more while the losers will aim ineffective strategies at cash-strapped buyers. As BBBY’s Chapter 11 filing suggests, investors ought to analyze individual companies to distinguish the likely winners from the losers. Bank of America predicted that about $1 trillion worth of corporate debt - 8% of the total - could default, reported the Times. Joe Davis, Vanguard Chief Global Economist, warned tighter financial conditions will force companies to cut costs, part ways with workers, and ultimately file for Chapter 11. ![]() More bankruptcies are on the way as banks cut back on lending. They instead began buying those items from Amazon AMZN. Before his arrival, store managers had the flexibility to stock up to 70% of their local shelves with goods that customers wanted - most notably, discounts on branded goods such as Cuisinart food processors and OXO cookware.Īfter Tritton forced stores to rid their shelves of branded goods and replace them with private label ones, consumers entered the locations, searched for and failed to find the branded products they wanted to buy. Tritton - who neglected to consult store managers and customers ahead of time - bulldozed the private label strategy through BBBY. ![]() In November 2019, the board hired Mark Tritton, the former chief merchandising officer at Target TGT who had overseen a makeover that included loading up the retailer’s shelves with private label goods. The reason was activists who took over BBBY’s board saw private label goods as a way to boost the company’s profitability. Last summer, BBBY burnt through $325 million in cash as revenue plunged 25%. However, my analysis of why BBBY went bankrupt suggests a gigantic strategy misfire was the primary reason for its failure, rather than a difficult economy. Retailers - such as BBBY and David’s Bridal - as well as restaurants are filing for bankruptcy because they are “typically among the most sensitive businesses to challenging economic conditions,” the Times noted. This mixture of economic strengths and weaknesses aims the most pressure at specific industries. In April 2023, the 3.4% unemployment rate and a 4.3% rise in consumer spending - which accounts for 70% of economic growth - kept GDP growing at a modest 1.1% in the first quarter of 2023. As inflation persisted - rising as high as 9.1% in June 2022 - the Federal Reserve Bank raised interest rates from near 0% to a range between 5% and 5.25%.įor heavily indebted companies dependent on consumers squeezed by persistent inflation, the drop in discretionary spending has contributed to their inability to meet their financial obligations.
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