BEST BUY AND FED EX- A TALE OF TWO REALITIES

"Best Buy (NYSE: BBY) went Bye-Bye and blew up this morning on a monster earnings miss.

Grandma got run over by a reindeer...... right through the hole in your same-store sales numbers!

Unit sales declined, same-store sales declined, profits missed.

But Christmas was going to be so gooooood!

Uh, no.

Same store sales down 3.3% over the last three months, including Black Friday? What happened to the CNBS claims that Black Friday was "excellent", "awesome", "Big Box stores all did good"?

Diluted EPS of 0.54 is basically identical to the last quarter's 0.53, which is horrifying given seasonality. Revenue was down as well."
Market Ticker

"FedEx Corp. expects to move more than 16 million shipments around the world by the end of today, its projected busiest day in company history.

Holiday predictions included in Retail Report’s never-ending supply of shopping-related news releases say FedEx will move more than 223.3 million shipments between Thanksgiving and Christmas, an 11 percent increase over 2009.

More than half of that extra volume is expected to come from FedEx SmartPost shipments, a service largely used by online retailers and catalogue sellers. FedEx picks up the packages, then drops them directly at a U.S. Postal Service facility for the final leg to customers."
Des Moines Register

So how are these two stories connected? I'm no expert but I'm going to make a guess. Based on the relatively empty parking lots at the stores around here I'm thinking that most people are forgoing the normal orgy of Christmas shopping this year and just buying the minimum they need to buy to keep up appearances.

This would explain the upsurge in online shopping that is driving record volume for Fed Ex. It seems to me that if you really can't afford much, why go shopping? Just sit at the computer and get what you need online, probably at a reduced cost.

And if this is the case, the big box stores are going to get killed, as it appears is happening to Best Buy. If they can't get profitable during the Christmas season they aren't going to get profitable. And if they aren't profitable, they'll close. And all those jobs will be lost and all that commercial real estate will sit empty, both of which will cause further stress and collapse in the economy, feeding into the downward spiral of depression.

Merry Christmas!

UPDATE

Before you get all excited about the just released retail numbers go over to the Market Ticker to get his breakdown of these same numbers. The media, in particular Fox Business is spinning this!

Stuart Varney just said a minute ago that the sales numbers were back to the levels of 2007. REALLY?! How can this be with an official unemployment number of nearly 10% and the real number being closer to 20%? Are we really supposed to believe that with nearly 1 in 5 out of work or making one hell of a lot less than they used to that spending at the retail level is the same as when unemployment was around 5%? Do they thing we're that stupid? Well, yea, obviously they do because most will believe the lies because they want to.

You can't trust anything the government or the media says. What you can trust is your own two eyes and your ability to reason. If sales are up while unemployment is at 20% then something is wrong. If a bunch of people are using their credit cards and just sinking hopelessly into debt to buy a few more presents then maybe the numbers are up. However, over the last two years most credit cards had their limits reduced or were defaulted on by those that were unemployed so I doubt that this would account for sales increases. And revolving credit use decreased in October by 8.5% so I don't think that people suddenly reversed course.

Maybe the people that have lost their jobs didn't spend that much to begin with so their limited participation in the retail market isn't missed. I'd say this may be partially true but I would still think that lost sales are lost sales so the number should reflect that.

Maybe the people that still have jobs decided to pick up the slack and buy more so that we'd get over the hump. With prices being depressed by the lack of demand those that have money could find some great deals so this might be a partial reason. But I doubt enough to bring us back to 2007 levels of spending.

I think the truth is that the numbers are twisted and distorted to get the answers the government and Wall Street want. I think that the empty parking lots and the empty shopping carts being pushed around by bargain shoppers in the store tell me more about what's really happening than any corporate cheerleader ever will. I think that the empty retail centers that are popping up around here are far more indicative of the true state of retail than any chart produced by the Census Bureau.

I think that Best buy is hurting because people aren't spending in the store, for whatever reason. And I doubt that Best Buy is the only big box retailer that is going to have trouble surviving as their cost of operation goes up and the prices of goods sold have to continue to go down to attract shoppers. Without margins a business cannot survive and margins will collapse if prices can't be raised to reflect the true cost of goods sold.

I think that this holiday season will be the last for a bunch of companies that we've known for a long time.