Why Retailers Got Hit This Week

Companies from SodaStream to Lululemon took huge hits over the last week, but the reasons for the falls varied.

Jan 14, 2014 at 1:05PM

The morning papers may have been a bit of a shock for you today, especially if you're heavily invested in American retailers -- or if you hadn't seen that Peanuts strip yet. A wave, nay, a storm system, of bad news has descended on the sector, and yesterday it all came to a head. Yesterday was a sort of sector deadline for updates due to the beginning of the ICR XChange conference. Companies that are going to present at that conference needed to release updated financials in order to talk about those financials at the conference.

So, during the past week, December sales information and updated quarterly guidance came down from SodaStream (NASDAQ:SODA), lululemon athletica (NASDAQ:LULU), and Pier 1 (NYSE:PIR), among others. All that news was bad. All of it. You might have thought, "Hey, here comes some good news for me, the average retail investor." Sorry.

What went wrong?
Analysts said the 2013 holiday season was the worst in years. Black Friday weekend sales fell, and the shortened shopping season took a heavy toll. SodaStream, for instance, cited lower selling prices and a shift in the company's product mix. That's a good summary of the problems that the entire industry saw.

Consumers suffered throughout 2013 with incomes flatlining across the board. That gave everyone a reason to look for more deals, or simply cut back altogether. The shorter selling season didn't help, either. Traditionally, retailers have thrived during the holidays on both the focused shoppers and the walk-in shoppers. For instance, by having big red signs out front for a month, you get extra foot traffic from the guy who was just going to go to the grocery store but saw that shoes were on sale. This year, there was less of that.

As a result, retailers felt the need to be more promotional to drive focused foot traffic, but sometimes not even that tactic was going to work. Pier 1's sales update last week was evidence of the generally difficult environment that retailers were fighting in. The company dropped its quarterly earnings, revenue, and comparable sales outlook due largely to bad weather. Management was happy with the promotional mix, but even with solid execution, it looks like Pier 1 is going to suffer.

Other issues in retail
While weather, the short season, income issues, and promotions are hurting a lot of businesses, investors shouldn't overlook the fact that some brands are simply weak right now. Lululemon announced a massive setback in sales yesterday, but not due to the environment. Instead, the business is still suffering from the massive brand setback that it experienced this year due to product quality issues and an uncensored founder.

The plunge this week should be the low point for many brands in the first half. Now that the clock has been reset, businesses can look forward to a stronger 2014. The holiday season this year -- a mere 40-some-odd weeks away -- should end up comparing favorably to a horrible 2013. Even so, businesses will still be struggling with flat incomes and other consumer drags for much of the year, if not the entirety of 2014. In short, better but not great.

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Fool contributor Andrew Marder has no position in any stocks mentioned. The Motley Fool recommends lululemon athletica and SodaStream. The Motley Fool owns shares of SodaStream. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

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