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What Top Stocks Foretell (Part 1)

3 February 2008 - Features - Editor

Stock value may be said to represent customer appreciation, if margin efficiencies are assumed to be equal in free enterprise. A company that outperforms nearly identical competitors reflects the popular choices of a majority. The value of Sears stocks are even higher than the nominal stock value that it has enjoyed for decades: the brand name is an icon of the American way of life. It has an indelible place in the modern history of the United States. The company has enabled countless baby boomers to dress well for less, and has made it possible to shop from the leisure of our own home, and in privacy.

Sears Holding has announced that earnings per stock unit for the last quarter of 2007 will fall by over 50% compared to the same period for the previous year. Store sales in the United States have declined by less than 3% to cause the precipitous slide in earnings. These are not just losses for vintage stock investors, but sad days as well. It is true that consumer confidence has been at low ebb after the sub-prime crisis, but that does not justify the disproportionate fall in earnings compared to the Sears gross revenue trend. Sears is not an industrial brand-it is as close as you can get to the hearts of an entire generation of Americans and Europeans. What should we infer from this troubling phenomenon?

Customer Integration Represents Fundamental Stock Value

Sears published its first catalogue before the 20th century had dawned. It celebrated the 1970s with stores in one of the tallest buildings of the world. It remained in tune with consumers throughout the 20th century, and has been the choice provider of apparel, white goods, and the product ranges of its sister concerns such as Kmart. The umbrella brand has stayed in tune with fashion trends and consumer preferences, and has constructed a deep moat against various challengers for its vaulted position in consumer minds. Has it failed to connect with new demographic groups on both sides of the Atlantic? Do the old Mantras of the company hold appeal for the global market place of today?

No stock can flourish without customer intimacy. Relationships between enterprises and individuals are not static. The foot fall of today may not be repeated tomorrow. Word of mouth promotion can make or break brands. It would appear that the colossus of fixed expenses to which Sears has become stuck does not deliver values for Hispanics, African Americans, young Caucasians, and all the immigrant groups that constitute the US and EU clientele of today. Perhaps the company has failed to sense attitudes to product categories such as electronic games, and to services related to fitness, which the young of these times cherish.

What Top Stocks Foretell (Part 2)

 


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