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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 days, we'll have our "12 Days of Content" surrounding consumer-focused names that look set to profit or perish amid the holiday cheer.
Whether we're kids or investors, we all want to see a present under the Christmas tree in one form or another. For the younger crowd, it might be a train set or a new doll, while investors look to unwrap stocks that will turn into the next 10-bagger. Sometimes, though, everyone finds a lump of coal in his or her stocking.
Last year, I chose four companies I thought would spoil any Christmas cheer, and while only Blockbuster ended up in the dustbin, the other three still darkened the spirits of investors everywhere. In a year that saw the S&P 500 rise nearly 11%, Sears Holdings, Radio Shack, and Borders Group (NYSE: BGP ) were all are down near 10%.
So which companies do I think are akin to lumps of coal in the stocking this year? While Sears continues to dwindle in the face of Wal-Mart and Target, its case for going completely under doesn't seem particularly strong. And even though Radio Shack still doesn't seem relevant despite Best Buy's (NYSE: BBY ) recent stumble, its electronic doodads do serve a niche, but I wouldn't count on investors hoisting a warm cup of wassail for either of them this time next year.
Rip out the pages
Borders has also found something of a lifeline, with hedge fund operator Bill Ackman expressing a desire to help it take over Barnes & Noble, though a buyout in the other direction might make more sense. Revenue dropped 18% in the third quarter, and same-store sales declined by 12.6%, while online sales decreased 8.6%. But because it looks like it may violate its credit agreements by the first quarter of 2011, I think the bookseller has a chance to join Blockbuster as a ghost of Christmas past.
So I'm re-upping my bet that Borders will find itself on the list of companies that are seeing their last Christmas, and I'll add the following three, too.
The office is closed
Forget the disgrace of being kicked out of the S&P 500 -- office supplies retailer Office Depot (NYSE: ODP ) is likely to be kicked to the curb permanently. Both it and rival OfficeMax had been subject to possible buyout rumors, as the economy has wreaked havoc with business purchases of paper clips, rubber bands, and correction fluid.
To get to a surprise $0.04-per-share profit last quarter, Office Depot had to slash overhead. That's a fine short-term remedy, but pressure from its biggest competitor, Staples (Nasdaq: SPLS ) , means it's going to need additional ways to hold the line on costs. That's not an easy, repeatable solution, particularly after its CEO resigned following violations of Regulation FD rules. Office Depot is a stock that will be left at the station.
Don't bank on it
It's a race to the bottom for both Bank of Ireland and Allied Irish Banks (NYSE: AIB ) , but it appears inevitable that the Emerald Isle's government will eventually assume control over these financial institutions, perhaps as early as this week. The government has told the banks they need to raise much more capital to solidify their financial position, with Bank of Ireland having to come up with 2.2 billion euros and Allied needing a gargantuan 9.8 billion euros by the end of February. Government support for Bank of Ireland could swell to as much as 80%, but Allied will likely see the government assume a 95% ownership stake after injecting more capital.
Many investors buy into the notion that like Anglo Irish Banks, both Bank of Ireland and Allied will be too big to fail. Certainly the government is trying to prop them up, but the fault lines may be too wide, and either or both could be swallowed up. The luck of the Irish appears to have run out with investors left overdrawn. Effectively, Allied might not even see this Christmas, let alone next year's.
A prescription for disaster
You'll need a heavy sedative to stay invested in pharmacy chain Rite-Aid (NYSE: RAD ) . The stock has posted yet another quarterly loss, even as it says that adding groceries to its lineup through a partnership with SUPERVALU helped bolster sales. Yet that trend's already being pushed by the more successful Walgreen (NYSE: WAG ) , which was looking to differentiate itself from CVS Caremark. In the most recent quarter, Rite-Aid's revenue was still off from the year-ago period. Same-store sales were down more than 1%, prescriptions filled were off almost 2%, and management was forced to lower its full-year forecast yet again. The company needs some stronger medicine than just selling groceries to be able to make it another year.
Not the brightest bulbs
These stocks are colder than the frigid temperatures outside, and the struggling economy means that some of them -- maybe all of them -- won't be around to usher in 2012.
Do you agree that Borders is at the end? Is Allied Irish Banks about to close its account? Will Office Depot and Rite-Aid 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.