Another Pillar of Retail Strength

Kohl's Net Falls; Shares Drop on Profit Forecast (Update1)

May 15 (Bloomberg) -- Kohl's Corp., the fourth-largest U.S. department-store company, said earnings dropped 27 percent and forecast profit that trails some analysts' estimates as consumers facing record gasoline prices slowed spending on clothes.

Trailed some analysts' estimates? I find that hard to believe. Surely the analysts saw this coming.

Sales at stores open at least a year fell 6.7 percent. Shoppers have curbed spending on clothing and home goods as housing values decline and costs for food and fuel surge.

Pillars of Retail Strength don't concern themselves with same store sales though (see link below).

``We're facing a downturn led by the consumers, and there is no visibility today as to when this is going to get better,'' Richard Jaffe, an analyst at Stifel Nicolaus & Co., said in an interview on Bloomberg Television. He recommends buying the shares.

The retailer ``is really running a very tight ship in a very tough environment,'' Jaffe said.

Looks to me like it is analogy time.

First Mate: We can't slow the ship. We've hit yet another iceberg. The water keeps coming in through the hull creating somewhat of a downturn. There is no visibility due to the fog.

Captain: Get China on the radio. Tell them we've rethought their offer. We're willing to sell them our ship at the agreed upon price.

``We do think there's a chance to get some of that stimulus money with an aggressive marketing campaign,'' Mansell said.

Retailers are specifically targeting some of the "free" money sent to us by using expensive money ("aggressive marketing campaigns"). I'm not arguing that they shouldn't. I'm simply suggesting that inflation causes malinvestments. That's the theory. In my opinion, here's the practice.

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