4 Stocks Enjoying Their Last Christmas?

To celebrate the holidays, we here at the Fool are devoting extra virtual ink to all things consumer-focused in a special section called "The 12 Days of Christmas." Over the coming week, we'll have our "12 Days of Content" surrounding consumer-focused names that look set to profit or perish from the holiday cheer.

Some stocks are like roasted chestnuts bought on a snowy streetcorner at Christmastime: You want to get 'em while they're hot.

Over the next decade, toymaker Hasbro will be one of those companies, transforming its portfolio of games and action-figure heroes into movies, TV shows, and other entertainment opportunities. The Motley Fool Stock Advisor recommendation is potentially a huge, multimedia powerhouse.

Others companies, not so much. We'll be lucky if they're still hanging around by next Christmas.

A lump of coal
Even with the tight economy, discount retailer Sears Holdings (Nasdaq: SHLD  ) couldn't maintain a grip on cash-strapped customers, who fled in droves to Wal-Mart Stores (NYSE: WMT  ) and Target. Chairman Eddie Lampert favored the financial sleight of hand commonly used at hedge funds to generate cash instead of investing in his stores. Total return swaps, share buybacks at astronomical prices, and Lampert's apparent disdain for remodeling the retailer's aging buildings led many to conclude that he was more interested in the land they sat on than salvaging the company's portfolio of still-iconic brands.

The once-venerable retailer has paid the price of neglect, achieving not one single quarter of positive same-store sales since the combined company emerged from bankruptcy. Unfortunately, investors have bought into the argument that Sears' land will ultimately unlock shareholder value, but a weakening commercial real estate market doesn't bode well for that scenario. As customers continue to avoid its stores, a less robust cash hoard will leave Sears with less room to maneuver.

Enough to make you cry
The news parody site The Onion once ran an imaginative interview with RadioShack (NYSE: RSH  ) CEO Julian Day: "There must be some sort of business model that enables this company to make money, but I'll be damned if I know what it is. You wouldn't think that people still buy enough strobe lights and extension cords to support an entire nationwide chain, but I guess they must, or I wouldn't have this desk to sit behind all day."

Satire, yes, but it also hits pretty close to home. Unless you're looking for some obscure doodad, many people just go to Best Buy (NYSE: BBY  ) or another big-box electronics store to buy their laptops, large-screen TVs, and other gizmos, rather than the Shack.

Although sales have been on a multiyear downtrend, the company has still managed to earn $192 million in the last four quarters.

However, not even rebranding the company as "The Shack" can offset its own dwindling consumer base. Last quarter, RadioShack was reduced to blaming lower sales of batteries and GPS devices, among other reasons, for its failure to report revenue growth. Coupled with a reliance on stand-alone GPS devices that have themselves been gutted by wireless telecoms incorporating the technology into their phones, the Shack's business model seems even less relevant to today's electronics customer.

A busted business
Blockbuster (NYSE: BBI  ) must also realize that the shelf life of its bricks-and-mortar movie-rental model is reaching the end. While Netflix continues to thrive with its mail-delivery model, and Redbox is a kiosk movie star, Blockbuster grasps at whatever seems currently hot. Total Access -- a supposedly seamless store, mail, and online rental-and-return solution -- was never able to save the chain, and we don't hear much about it anymore. Blockbuster's alleged new saving grace is its own line of branded kiosks, which are now being rolled out. But this seems more an act of desperation than a carefully scripted plot for success.

Blockbuster has become a horrorshow of its own, with a growing debt profile and plummeting sales, making its next starring role likely similar to Circuit City's final performance.

Burn this book
Investors will be able to also turn the page on Borders Group (NYSE: BGP  ) , which has lost millions of readers to Amazon.com (Nasdaq: AMZN  ) and will likely lose millions more as e-books becomes even more popular. It's hard to ignore that one of the most popular iPhone apps is the Barnes & Noble eReader application. While e-readers such as the Kindle and Nook are unlikely to replace a physical book anytime soon, Borders has shown itself incapable of competing effectively in either form.

Wal-Mart, Target, and Amazon are all vying for a larger share of the reading public's dollar by cutting prices on best-sellers to $10. With the company's margins already under pressure, it will have a harder time matching those discounts, which could make this Borders' final chapter.

A wreath of mourning
There's no Christmas cheer in pointing out the companies that face chilly prospects in 2010, but these retailers all look like ghosts of Yuletides past. A weakened economy means that some of them -- maybe all of them -- won't be around to welcome in the New Year in 2011.

Do you agree that Sears won't be hoisting a warm cup of wassail next year? Is Blockbuster a burnt-out bulb? Are Radio Shack and Borders ready to be tossed onto the Yule log? Then go caroling in the comments section below, and let us know which company you think is enjoying its last Christmas.

Amazon.com, Best Buy, Hasbro, and Netflix are Motley Fool Stock Advisor selections. Best Buy, Sears Holdings, and Wal-Mart are Motley Fool Inside Value selections. The Fool owns shares of Best Buy and Hasbro. Try any of our Foolish newsletter services today, free for 30 days.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.


Read/Post Comments (8) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 15, 2009, at 4:54 PM, atelias wrote:

    Dear Rich,

    I don't know what you mean according to BBI when you say "with a growing debt profile " in fact you can see that the evolution of the "Total Current Liabilities" is like this: 819,600 946,500 1,031,700 1,253,400 during the last four quarters. Perhaps you want to buy cheaper this stock.

  • Report this Comment On December 15, 2009, at 5:00 PM, zeynoc63 wrote:

    Great analysis and so much value add as usual from Motley Fool. Although the bar is so low for you, you guys can not even beat that. Just keep on beating the dead horse without any kind of meat behind your thesis. How can you call NCR-BBI partnership as something that came out of desperation? Why would not you talk about the lawsuits going on between CSTR and the studios before announcing them kiosk star? Just do some further research before you write these things.

  • Report this Comment On December 15, 2009, at 6:17 PM, Fool wrote:

    All I can say is Rich Duprey is as dumb as a box of rocks. The man that runs ESL knows more then you will ever know. You wish you had the brains Eddie L has. Sears owns the appliance business and the market share The service department is the largest in the world The company is going to be around longer then you will. The shares outstanding are extremely low compared to its competiton. You must not no anything about this company. I hope you look into your facts before you put a guy down like Eddie. I don't think you could even carry his Jock Strap.

  • Report this Comment On December 16, 2009, at 9:22 AM, B0BERT wrote:

    Rich Duprey,

    Your article is a joke. Normally I'd leave it alone, but I expect more from the Fool.

    Your Sears analysis looks as if you've done 100% of your research by reading SHLD message boards. Did you realize that SHLD made millions with total return swaps? Did you mention that 10% of the company has been repurchased below book value, 5% of the company has been repurchased at half of book value? Did you mention that SHLD is generating hundreds of millions of free cash flow annually? They are the largest seller of appliances in the world and gained market share in that category last year? SHLD has more cash than long term debt, and no long term debt due in 2010 means bankruptcy before next Christmas is about as likely as the sun exploding before next Christmas.

  • Report this Comment On December 16, 2009, at 9:22 AM, B0BERT wrote:

    Rich Duprey,

    Your article is a joke. Normally I'd leave it alone, but I expect more from the Fool.

    Your Sears analysis looks as if you've done 100% of your research by reading SHLD message boards. Did you realize that SHLD made millions with total return swaps? Did you mention that 10% of the company has been repurchased below book value, 5% of the company has been repurchased at half of book value? Did you mention that SHLD is generating hundreds of millions of free cash flow annually? They are the largest seller of appliances in the world and gained market share in that category last year? SHLD has more cash than long term debt, and no long term debt due in 2010 means bankruptcy before next Christmas is about as likely as the sun exploding before next Christmas.

  • Report this Comment On December 16, 2009, at 10:24 AM, TrailSteward wrote:

    Come on; admit it. You woke up this morning lacking any imagination or inspiration. So you wrote a baseless article predicated on poor or vacuous research and two year old Onion Parodies. Today would have been a good day to let the understudy take a shot. I look for better from your team.

  • Report this Comment On December 16, 2009, at 1:10 PM, theriddler1 wrote:

    Hi - Just curious why you fail to mention the new cellular deals negotiated for RSH, its dividend, and the fact that other research companies are warming up to "The Shack" story. You've given up too soon on this name.

  • Report this Comment On December 17, 2009, at 6:49 PM, blue432 wrote:

    As for someone who has witnessed the dropping of one shoe since the so-called merger (6 years overall), Mr. Duprey could not be closer to the truth. It's been demoralizing to lay witness to the painfully slow demise of a retail legend. I feel bad for Mr. Sears and Mr. Roebuck because those idiot shareholders who approved that ridiculous merger thought Lampert was the next Warren Buffett. Please!There's only one Buffett. With two other companies the merger might have been a good idea, but not with two entities who were doing bad enough on their own. The shareholders just bought twice the misery. I fully expect the other shoe to drop in 2010.

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