Last week, we asked, How’s Retail doing?. Yesterday, we visited the subject of Borrowing & Spending. Today, as we hear from many more retailers, we will contextualize it.
From an annual industry report, "Top 100 Retailers. The nation’s retail power players" comes the following list and table. The first shows the top 20 retialers by revenue. Note that this year, restaurants have been added to the mix, with Mickey Dees (MCD) clocking in at 16, Yum Brands (YUM) at 35, and Starbucks (SBUX) at 42.
What really stands out to me is how Wal-Mart (WMT) simply dominates the revenue portion of the US retail sales. They are just shy of doing 4X the next closest retailer, Home Depot (HD).
Retail Sales Data, Revenue, Profits, Store Numbers
| Rank | Company | Number of Stores | Y/Y Change | 2006 Revenues | Y/Y Change | 2006 Earnings | Y/Y Change |
| 1 | Wal-Mart | 6,779 | 10.6% | $348,650,000 | 11.7% | $11,284,000 | 0.5% |
| 2 | Home Depot | 2,147 | 5.1% | 90,837,000 | 11.4% | 5,761,000 | -1.3% |
| 3 | Kroger | 3,659 | -1.8% | 66,111,200 | 9.2% | 1,114,900 | 16.4% |
| 4 | Costco | 488 | 5.9% | 60,151,227 | 13.6% | 1,103,215 | 3.8% |
| 5 | Target | 1,487 | 6.4% | 59,490,000 | 13.1% | 2,787,000 | 15.7% |
| 6 | Sears Holdings | 3,835 | -0.6% | 53,012,000 | 7.9% | 858,000 | 8.7% |
| 7 | Walgreen | 5,461 | 10.3% | 47,409,000 | 12.3% | 1,750,600 | 12.3% |
| 8 | Lowe’s | 1,375 | 12.2% | 46,927,000 | 8.5% | 3,105,000 | 12.1% |
| 9 | CVS | 6,202 | 13.4% | 43,813,800 | 18.4% | 11.9% | 1,354,800 |
| 10 | Safeway | 1,761 | -0.8% | 40,185,000 | 4.6% | 870,600 | 55.2% |
data courtesy of NRF STORES Magazine, July 2007
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Pretty amazing . . .
Top 20 Retailes by Revenue
1 Wal-Mart Stores Inc. (WMT)
2 Home Depot Inc. (HD)
3 Kroger Co. (KR)
4 Costco Wholesale Corp. (COST)
5 Target Corp. (TGT)
6 Sears/Kmart (SHLD)
7 Walgreen Co. (WAG)
8 Lowe’s Cos. (LOW)
9 CVS Caremark Corp. (CVS)
10 Safeway Inc. (SWY).
11 Best Buy Corp. (BBY)
12 Supervalu Corp. (SVU) (includes Albertsons)
13 Federated Dept. Stores
14 Ahold USA(e)
15 Publix
16. McDonald’s Corp. (MCD)
17 JCPenney (JCP)
18 Staples (SPLS)
19 Rite Aid (RAD)
20 T.J. Max (TJX)
Source:
Top 100 Retailers. The nation’s retail power players
NRF STORES Magazine, July 2007
http://www.stores.org/pdf/07TOP100Chart.pdf
Amazingly thin margins, too.
In fact, now that I think of it – what would a 20% Yuan revaluation do to Walmart?
The United States of Wal Mart…
Quote: “The United States of Wal Mart…”
The Peoples Republic of WalMart
At least now we know where all that credit card debt went.
This market is effing insane…..
Taken from Phil’s World
* Fitch ratings issued a warnings on commercial loans
* Moody’s cut ratings on another $5Bn in CDOs
* The WSJ slipped in the word “Meltdown” for the debt market
* Margin buying jumped 11% in May to $353Bn
* The NAR cut existing home sales forecasts by another point (down 5.6%)
# We learned that ANY BS from ANY Fed Governor can rally the markets
Let’s gap it up on basically nothing and then let it slide back for the rest of the day.
Ciao
MS
You just wait until Wal Mart gets in the banking business..Then you can get a HELOC and some patio furniture (made in China) all in one store..
I cannot remember where I read this but a history lesson about Great Atlantic and Pacific Tea Company. Seems they too were the target of mom and pop stores, unions and congress back in the 1920’s. Charged with unfair labour practices, monopoly and various other ‘schemes’ to run rampant over the unwashed American public. All false of course but it took a Supreme Court decision to get everyone off their backs. After WWII, it was Sears Roebuck and Monkey Wards who had a duopoly on hard goods. Then came S.S. Kresge aka K Mart and now Wally World. Cycles come and go. Somewhere there is another Wal Mart being born. I wish I knew the name? Anybody? Anybody?
MS…your comments are laughable as usual.
The market can’t be insane. The market is a result of the psychology of its participants. It will also achieve the maximum pain for the most players possible.
All the cerebral bearish reasons for the market to collapse are baked in (apparently). It doesn’t care if your arguments are “right”.
Investors are not positioned for a melt UP…so that is the most likely outcome (imho).
You’ll see.
Fred, what do you expect the catalyst to be for a melt-up?
The correction in the dollar has allowed the exporting portion of our economy to participate in a global boom. Earnings are reflective of that.
Billions of new consumers are formed when all the emerging economies adopted more rational, capitalistic policys. We’re just starting to sow the benefits.
But in the US, the psycholgy has been overwhelmed by negativity — starting with the pain of the tech crash, terrorism on our shores, 2 wars, a recession, devastating storms…you name it!
AS I said above the market is moved by psychology. Joe six pack is watching from the sidelines…shocked at the move that makes no sense. Newbie hedge funds are so smart, that they see all the reasons for a collapse, so they’re short, and loaded with puts. (see record NYSE odd lot short readings).
So the matrket will do whatever will hurt the most people it can…which is explode on the fuel of short covering, compounded by underinvested masses chasing it as it breaks out (the really scary triple top!).
Got a match?
~~~
BR: Fred,
That’s very consistent with our May 2 call for a melt up to Dow 14,000
http://bigpicture.typepad.com/comments/2007/05/buying_panic.html
Not sure melt-up is the right word… Rising equity prices make up for the inflation and that is a zero sum type of game.
Since the existing inflation is being negated (core) it appears that we gave a gain (still gunning for 14k) while we are probably just flat for the year.
You still have not answered the question about employment…..why are wages stagnant if (as you say) employee’s are scarce?
and Fred pay close attention… those are not my comments they are from another site-why they were prefaced. But since you are selective in your understanding I expected that.
Correction on the dollar….oh boy….
Correction is a fundamental aspect of currency trading. I see what is going on with the dollar as nothing to do with fundamentals and everything to do with printing and diluting them.
All you do is make statements….how about some interpretation or insight? no the news seems to do that for you.
Ciao
MS
Fred is bang on in terms of why the markets are marking new highs in the face of the current situation.
The investing public is masochistic in its pain tolerance. Just go back to May 2000, the Nasdaq had already suffered an 1,800+ pt decline from the top (35+%) and anyone with half a brain cell could see that the promise of a “new economy” made little sense in terms of where tech stock valuations were. Yet the talking heads still jabbered on and anyone who missed out on the boom decided this was the time to jump in with both feet. End result, a 4 month long summer rally which as it continued on, brought back most of those who jumped off the first time. As the summer went on, the critics got sidelined again and it was time to put the party hats back on. A 1,200 pt rally ensued through the end of September which was again 35% or so above the lows.
The situation today is not much different except with more liquidity in the market. We already saw in February what the market is capable of doing but until the RMBS downgrades have cycled through the liquidity channels and consumers have maxed out their credit cards, it could be the end of Q3 before things get really exciting. Just like in 2000…
Casual…there are no similarities to 2000, except that the market is making new highs.
The bubble now (crowded trade) is in negativity.
The psychology then was greed — “get me those internet thingy IPOs”.
The psychology now is fear. And earnings are real.
Fred – what if retail investors have no money left to chase the momo train? Who exactly is expected to increase competition for shares? The only thing I see reducing share supply is LBO and massive repurchase programs.
Also I feel like corporations have prevented a lot of dollar recycling due to their cautious hoarding of profits, since capex still seems weak. What catalyst is there for this to change?
good luck getting an answer or anything that addresses what you brought up.
Ciao
MS
TH…look at the NYSE FREE CREDIT (read:cash). It is up almost 50% from 2000 and is at an all time high. We’re talking ~ a $ Trillion….sitting, and watching.
As far as capex goes, corporations have reacted to the same psychology as investors….but will remove the wallet from the hip and spend, or lose market share.
MS – I stand a much better chance of getting an answer than you do. When I ask questions, it’s because I genuinely want to know his opinion – even if I choose to disagree with it. I’m more inclined to agree with your points, but frankly less inclined to read them.
Fred, do you think the waiting money is looking for a sudden market rise before gaining the courage to jump in? Or are they looking for a correction a la Feb-March ’07 in order to get a bargain? Or maybe they’re just sitting out for the summer?
capex is dead, will be dead and has’nt been an issue since 2000.
Why invest in the business when all you need to do is secure more debt and buyback shares??? ANd then saddle the shareholders with that debt.
If capex was truly a factor then why are these companies not issuing a dividend?? seems to me that if a business was truly interested in organic growth then they would easily issue the dividend and then use the cash for expansion…that drives cash flow that drives profits etc.
instead of artificially creating it via buybacks that could be used as capex spending.
Ciao
MS
“Fred, do you think the waiting money is looking for a sudden market rise before gaining the courage to jump in? Or are they looking for a correction a la Feb-March ’07 in order to get a bargain? Or maybe they’re just sitting out for the summer?”
Yes…Yes…and YES.
Also watch the stop loss orders get filled a few points higher from here…as stunned shorts panic buy.
First target (and heavy lifting) at S&P 1571.
PS…TexasHippie…thanks for the cival discussion.
Fare ye well…
MS – some companies – perhaps many – are obviously not interested in longer-term organic growth (e.g. HD). But not all are, and I’ve been trying to find companies which are pouring money into capex. Picks like S and ALVR have done well for me, and they are both certainly investing significant amounts in capex and R&D to generate organic growth despite criticism of short-term risks. CSCO may prefer M&A to organic growth, but they’re buying companies with organic growth instead of just buying back their own shares. INTC has invested significantly in 45nm process technology and in R&D for new processors.
The companies are there, and many are great value plays. If they’re successful with organic growth, what’s keeping other companies from doing the same?
I like your picks TH, and am actually long all four.
There IS massive capex in telcom, as what used to be a bandwidth glut is turning toward a bandwidth shortage, thanks to IP video, gaming, etc. This is actually the basis for alot of my bullish outlook. The internet is entering its most exciting (and profitable) phase. Some call it an eco boom, or S curve. There will be another bump in productivity (variant view)and those companies that don’t step up and spend will get run over.
>> If they’re successful with organic growth, what’s keeping other companies from doing the same?>>
I have no idea why…which is sort of my point..if we are all doing so wonderful then why are we seeing a record number of buybacks with a virtual non-event with capex? speaking from a macro point of view.
Capex has supposedly been set to save us for quite a long time…….save us from what? According to the perma bulls we are fine and nothing can change that so using that as an argument is a bit of a stretch.
BTW Fred lost all semblance of any civil (not CIVAL) discussion when he (and others) decided to get personal, so excuse me for not having any patience with him….
Ciao
MS
Fred – how’d you find ALVR? I recently pushed it to 50% of my entire portfolio – so while I’m bearish on the health of the US economy, I’m very bullish on specific stocks. I’m long WiMAX players with my specific interest lying in internet-oriented telecom (I forgot CLWR in my earlier posts, but it’s a small position). As such I’m also long infrastructure companies like CSCO, JDSU and AKAM. I need to do more research on telecom buildouts such as FiOS to determine where the money is going, because I think I should have gone with Ciena instead of JDSU. Recent IPOs such as OPXT, OPTM and LLNW are interesting but I can’t decide where to enter. Would you care to elaborate on where you’re long on telecom? I believe your S-curve theory, but I think it’s specific to telecoms with a focus on Internet Protocol (packet-switched instead of circuit-switched), so I’ve stayed away from non-WiMAX wireless data providers based on technologies such as EDGE/LTE; plus I think QCOM royalties will continue to squeeze profits.
MS – you’re welcome to react to others how you choose. I’m only here for information, and I really don’t care who is attacking whom. I do enjoy your analytical discussions however, so please keep up the interesting debate.
Wimax will be huge, imho (despite the negative hype from the incumbent carriers). ALVR’s the market share leader (early on) in this emerging tech. The FCC potentially changed the game yesterday on opening up some spectrum from TV stations. I’d look for CSCO to make an aquisition in the space which will change the psychology on the whole group.
I’m overweighted tech/telcom. AAPL, RVBD, AKAM, EMC, ORCL, BBND, SNDK, VSL, ADBE, plus those you mentioned.
Be careful on the IPOs…many times they roundtrip to the original price before a big move.
Barry…nice call back on May 2nd — Melt up, and sorry for the OT thread.
Buyback stock with capital spending on hold will produce maximum profit for the company in a deflating world sector (USA) in a repo state. Create an increase in stock price to lure more hopefull investors with their real money. Don’t spend; counter productive at this juncture. Outsourcing helps too.
Dimes on the dollar is the way to make a real buck these days. Financial wars. I hope it doesn’t end up badly in the streets.
It will be interesting to see what happens with our foreign owned factories here in the states.
Add energy. Ouch. Every family for themselves.
TH, please don’t put 50% of your portfolio in any single stock — I’m saying this as someone who got crushed (you wouldn’t believe how much $$ lost……) in 2000/2001 while extremely overweight in SUNW and CSCO.
While WiMax ought to be huge, and ALVR is the market leader, Fred is correct that you can easily imagine CSCO making an acquisition in that space. What if CSCO buys a competitor to ALVR? While the rising tide might float all the boats, it just seems too risky to me.
Another view of my growling.
In the ‘QOTD: Bernake on Inflation’ post down the TBP page … Aaron Byrnes made a post that caught my eye
he says “the Fed is low price cheerleader – then promoting offshoring of manufacturing in order to keep store shelf prices low and exporting high paying jobs …’
I’m back gerrrrr … I agree that global capitalism is engaging in a sort of union busting … but its really bringing Americas Standard of Living (Cost of Living) in line with world cost of Living so we can compete and sell to the world.
That’s bad for a couple generations of US citizens.
Whammer – thanks for your concern and I agree. ALVR is only 10% of my overall investments, but 50% of the portfolio I personally manage. Regarding competition, what I love about ALVR is that they’ve done so well against strong competition already. The contracts for Sprint’s first round of rollouts went to ALU, NT, MOT and NOK – but ALVR has worldwide growth well covered. Other smaller competitors may be better takeover targets but are really struggling to compete with ALVR. CSCO seems to prefer high-quality targets for M&A even at a premium, and they would be wise to buy ALVR instead of any of its affordable competitors.
Whammer and TM and anybody
Check out this story headlined I read yesterday “Can The Internet Handle HD”
http://www.tvtechnology.com/pages/s.0089/t.7138.html
Upgrade or price segments out of the picture?
Greg….that’s the basis for alot of my tech optimism, and it will go viral, imho.
Buy stocks that address this coming (unexpected) demand. BBND is addressing this very issue for the cable co’s, which will have the same issues on thier systems. They will migrate their systems to “switched digital video broadcasting,” that will free up massive bandwidth. Look up a report from CableLabs on this subject.
Good article, thanks.
Demand Debate
worried about intellectual climate
upgrading tech out of population segment economies for tech jobs is not a step forward – add another HD cable station next week and dilute ad revenue more – increasing everyday costs to products and internet provision
IMHO thank the defense sector again for all this – we need eyes everywhere in the 21st
what are we going to do with all these people in a robotic world? I guess keep creating inflation making jobs.
my lifetime 1958 to 2007 doubled population 3 billion to 6 billion people even with a few wars in there
It will also achieve the maximum pain for the most players possible.
The market will achieve the minimum equitable gain agreed upon by all participants
The market gain = The most gain possible by the winners and sellers minus the most lost and spent by the losers and new buyers
do you think the waiting money is looking for a sudden market rise before gaining the courage to jump in? Or are they looking for a correction a la Feb-March ’07 in order to get a bargain? Or maybe they’re just sitting out for the summer?
I think they may also be waiting to see if the subprime mess will bleed significantly into other parts of the economy. I am seeing that a lot in the airlines. There is a lot of tentativeness there right now and yet the numbers are value buys if the airlines can hold to their earnings which is looking increasingly likely based on the way they are effectively managing their capacity. I’m holding CAL which is showing no indication of slowing growth and has a high institutional ownership percentage showing that the big boys tend to agree
TH, good news re ALVR ;-). I think you are correct that there is a lot to like about ALVR, I just can’t bear to think of anybody putting too many eggs in one basket anymore…..
Greg, thanks for that article. There is very little doubt that video over IP is going to be huge huge huge.