TheStreet.com’s Marek Fuchs noted that warnings from Best Buy and Circuit City in the past week that earnings will be lower than expected for the fourth quarter should send a warning signal to retail reporters.
And that warning is that just because the stores are full during Christmas doesn’t mean that the retailers will be making a lot of money.
Fuchs wrote, “The stores still sold a lot of televisions; they just weren’t making money on them. As a sidebar, this obviously confirms what The Business Press Maven has been shrieking his pretty little head off about concerning how the media’s focus on the size of the holiday-shopping crowds does not necessarily mean that stores — and, by extension, investors — will make any money. The Wall Street Journal even notes that some of the explanation for crowds at Circuit City had to do with its 30-day price guarantee. These shoppers were entering the store repeatedly to get their lower price match, even while the media were nodding approvingly at their presence.
“But even The Wall Street Journal, which should know better but rarely does, fails to see the new and essential dynamic at play in the ‘unexpected’ speed at which prices on these TVs plummeted.
“Neither do the rest of the business media, which this morning are blaming promotions or competition from Wal-Mart, Target, Costco and Home Depot. But promotions were not invented yesterday, and these discounters, while admittedly increasing their efforts to sell electronics, have been around for a long time.
“What we are dealing with here is the unprecedented speed at which prices of a new technology fell. Prices of new technology have always trended downward at a reliable pace, but this was something new in terms of pacing.”
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