Retail coverage should focus on profits, not sales
The Street.com’s Marek Fuchs is still wondering why all of the Black Friday coverage of the Christmas shopping season is focusing on sales and not what really matters to these retailers — profits.
Fuchs wrote, “Please hold The Business Press Maven’s guiding hand for a moment here so he can walk you through the confusion of post Black Friday coverage. Not only is it confused, but the only factor that really matters — profitability — barely gets a mention.
“Any investor who ever chases after the reporting of top line numbers without considering what role discounts played and what, if anything, will fall to the bottom line leaves their flank exposed, big time. That’s why even before we start sorting this out, The Business Press Maven is in ill sorts.
“First, the overexcited headlines: ‘Black Friday Turned Green at the Malls Before Dawn,’ yells The New York Times, leading with: ‘The clock struck midnight. Then the mall struck back.’
“The New York Post hyperventilates even further: ‘Big Spenders Lift Retailers To Blowout Sales.’
“The Associated Press is more understated, but the takeaway is the same: We’re in the money. ‘Retailers hope pace of sales continues.’
“Talk abounds about sales numbers, traffic, early openings and even — approvingly — the discounts that drove much of the traffic and sales. Which is where The Business Press Maven — who, as you know, believes we are going to have a good though not spectacular holiday season — urges a note of caution.
“Sales numbers don’t matter in the end unless the sales are profitable. Those discounts can eat into profits pretty quickly, as can those longer hours, with workers paid double time. Let’s think in terms of store profits, not sales, as the business media does.”
Read more here. Fuchs likes a Reuters story that makes the point about profitability.