Анализ рынка ритейла и критическое мышление (кейс) / Where, Oh Where, Have The Critical Thinkers Gone?

Анализ рынка ритейла и критическое мышление (кейс) / Where, Oh Where, Have The Critical Thinkers Gone?

by Евгений Волков -
Number of replies: 0

Where, Oh Where, Have The Critical Thinkers Gone?

Apr. 23, 2017 6:09 AM ET
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I am writing to refute this weekend's most popular WSJ article: Brick and Mortar Stores are Shuttering At Record Pace.

I would argue that the WSJ's article is fluffy and doesn't paint a well balanced picture.

Incidentally, Home Depot, Lowe's, Costco, and TJX, all near all-time highs, suggests that Brick and Mortar retail isn't dead.

As an undergraduate, I earned a bachelors degree from UMass Amherst and the Isenberg School of Management, majoring in Finance, class of 2003. I loved my time at UMass, as this is where I met my wife, made some good friendships, and enjoyed the collegial experience, in a fun college town atmosphere. In terms of the actual classroom experience, my favorite professor was actually a lecturer in the Marketing Department, yes not the Finance Department, by the name of Doron Goldman. I took a few of Doron's classes, and besides having a gift for connecting with his students, Doron instilled in all of his students the importance of constantly working towards becoming a "critical thinker". I thought of Doron this Saturday morning, and was reminded that even a well-regarded publication like the WSJ could use a refresher course in the fine art of "critical thought". Enclosed below, please see a front page article of the WSJ.comsadhere is the link).

The third sentence of this super popular article (see below) argues the bebe Stores Inc. store closings mean something (I anticipated that financial journalists would waste a lot of ink on bebe, so I addressed this on Seeking Alpha, this past Friday afternoon in this article). As I point out in the article, bebe was a zombie that hadn't fallen down yet. Sweden's H&M has a $35 billion market capitalization and Spain's Inditex Group, the owner of Zara, has a $100 billion market capitalization. So it is fun to douse gasoline on this bonfire, but this isn't critical thought.

As I pointed out in my March 30, 2017 article: Embrace The Panic, Some Retail Stocks Are A Good Buy, it has become a cottage industry for the financial press to attempt to proselytize the American public into this narrative that Amazon (NASDAQ:AMZN) will literally take over the world. I ain't buying it as this is simply weak critical thinking. Perhaps, because when retail chains close, it is more visceral to see a store you once shopped at, now shuttered and vacant. Perhaps, there might be an emotional connection to thousands of employees that lost their jobs in the fallout. I agree that it is a bit emotionally taxing to see large empty storefronts mothballed and definitively sad to see anyone lose their job, let alone the hard worker bees, most likely on the lower rungs of the economic ladder, simply trying to make it in this super competitive world. However, let's not get carried away and start suggesting that a phenomenal business like Macy's (NYSE:M) is going to go bankrupt due to the loss of mall foot traffic, as after all, everyone visits the mall to go to bebe stores first and they may or may not visit other stores secondarily.

If we look at the WSJ chart from this super popular article, none of the stores listed below are innovative or have unique merchandise, prices, or any competitive advantage.

Source: WSJ written by Suzanne Kapner (April 21, 2017)

Let's play devil's advocate. Look at the five year stock performance of Home Depot (NYSE:HD), Lowe's (NYSE:LOW), TJX Companies Inc. (NYSE:TJX), and Costco Wholesale Corp. (NASDAQ:COST). These four, and there are others, look pretty robust to me and all four are near all-time highs. Hmm, I wonder if the cumulative market capitalization increase for these four names alone has eclipsed the cumulative lost market capitalization of all the names on the WSJ chart (over the past five years)? I think we know the answer to that question.

Source: Google Finance

I am not sure how the purge of retail overcapacity due to super low interest rates, and skewed executive compensation tied to short term stock prices and growth rates (as recently as five years ago, it was probably best HBS practice for retailers to build out their store footprint) can be broadly interpreted. Let's face it, at least in this day and age, far too many executives are self dealers that only really care about their executive compensation and figuring how to meet their lofty goals so they can earn their stupidly generous pay packages.

Yet, somehow when the industry is retail, and not computers, technology, restaurants, or any other fiercely competitive sector, it is ok to make the GIANT THOUGHT LEAP that Brick and Mortar retail is dead because the weakest and most marginal players have gone bankrupt and will be liquidated. Retail is simply in the midst of a noticeable shake out and down cycle that occurs in most other industries. Yet, somehow the press and American public are simply spellbound that the business cycle applies to retail, too.

Source: CNBC

The irony of this entire conversation is that the tombstones for great businesses like Macy's are being carved out by the press, and ironically, at a time when Amazon is actually building out its physical store presence. Moreover, there are recent rumors that Amazon is considering buying WholeFoods (NASDAQ:WFM), and BJ Wholesale club.

Source: Investors Business Daily

Finally, if retail is dead then why are Apple Stores (NASDAQ:AAPL) packed every time I walk by them?


As my former professor and now friend, Doron Goldman, taught me, the most important skill we can cultivate is the ability to think critically. I strive to constantly get better at it, but often fall short. The financial media and media at large can be very persuasive and write articles that at face value seem intuitive and logical, yet held up to rigorous scrutiny actually display poor logic and weak thought processes. I am not throwing rocks, because I too live in a glass house, and have gotten intellectually lazy and intoxicated by first level thinking on many occasions. However, my broader point is that if you want to become a better investor, the active pursuit of keeping an open mind and becoming a perpetual learner is par for the course.

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