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Strategies & Market Trends : Zeev's Turnips - No Politics -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (32919)	2/24/2002 11:15:32 PM
From: ajtj99	Read Replies (2) \| Respond to of 99280

Mish, free merchandise is just that - free goods. If you are a vendor for Home Depot or Lowes and they are opening a new store, you're expected to provide all or substantially all of the opening stock at no charge. This is how you "help" the retailer expand while they are helping you expand your sales. It's something that has grown over the past couple of decades as a few retailers have grown more powerful. Even small chains leverage these concessions from small vendors now. If you are looking at retail stocks, you have to be impressed by the tricks employed by some growth oriented chains to keep their sales increasing. For example, Walmart supercenters are selling appliances now. Lowes got into this a few years back, and Home Depot is also getting their feet wet in this category. Why? Because the big ticket items add up to big sales numbers, and the stock prices are predicated on top line growth. The store openings take care of the profit through the free merchandise. It is really a bubble waiting to burst for all but possibly Walmart. Look at groceries. Target, K-Mart, and Walmart are all selling them now. Why? Because they drive top line growth and repeat store visits. Are these retailers better than your local grocer at groceries? Probably not, but they offer convenience. Walmart probably will get the grocery formula right soon, however. They are by far the best retailer ever. They will dominate discount, drug, and grocery retail. Anyway, I'm not going into enough detail here but I'm trying to get the point across that these growth retailers have been using a lot of tricks to get their numbers up and it's going to be tough to maintain that momentum now that the tricks are running out. I look for a collapse in the home improvement guys first, and the others later.