Lowe's --Do They Understand Merchandising?

Lowes Companies Inc (LOW) reported Q4 and year end results. They of course took the opportunity to explain that the market was beating them up and the consumer is not spending. Predictable management comments, all of which are correct were made by President and CEO Robert Niblock. Which is exactly the problem! The market knows that the consumer is staying at home and contractors are not buying what they used to.

The press release deals with the standard growth metrics of yesterday. Same store sales, openings, closings, relocations and square footage. The strategy therefore is monolithic geographical growth. Get the right location and the customer will show up.

What about merchandising strategy? All other retailers seem to have one. Some strategies are better than others but at least there is a baseline to compare to. Location is only one strategy. What about product mix, price points, promotions and all that marketing 101 stuff? It does not appear to be present. Or at least it is not sufficiently important enough to be mentioned in the earnings press release.

The world is changing. The big box we have everything approach may prove to be too overbearing for a selective marketplace. Does Lowes know how to merchandise?

Expedia -- Barry Diller's Schizophrenic Explanation

Expedia (EXPE) announced Q4 and annual numbers. It took them three to four paragraphs of apology before they laid the numbers on the table. Yep you guessed it. They lost money because of write downs of intangibles. Expedia, which is a Barry Diller company, is of course convinced that their brands are OK and according to the boss

"When we emerge from this downturn is anyone's guess, but what certainly is not a guess is Expedia's global leadership in travel and our conservative management, both of which will allow us to weather a downturn of almost any length and come out stronger than when this mess began."

Barry Diller has no clue when this one will become a winner. But let’s look at a few things that are going well according to the earnings release.

• Worldwide revenue from products and services other than hotel and air (primarily revenue from advertising and media, car rentals and destination services) increased 16% for the fourth quarter due primarily to increased advertising and media revenue.
• Advertising and media revenue increased 29% for the fourth quarter, accounting for a record 11% of worldwide revenue.
• Revenue increased 10% for the year, primarily driven by increased advertising and media revenue and worldwide merchant hotel revenue. North America revenue increased 8%, Europe revenue increased 14% (also 14% excluding the estimated impact of foreign exchange) and Other revenue increased 24%.

Today the stock was pummelled downward by about 10%. I am surprised that investors are surprised that worldwide travel is having some difficulties. Think about it. Fuel is expensive and if you think you are going to lose your job the vacation goes on hold. Duh!

There is a serious conflict here. In the context of difficult economic times, Expedia writes down asset values, a big time mogul pontificates and says problems are short term, but we do not know how long short term will be. (No SEC definitions here but Barry Diller is taking investors into his confidence) Investors bail and Barry Diller starts planning to acquire the company for less, much less. Think about it.

BearingPoint The Death of Professional Advice

BearingPoint (OTC BGPT) (NYSE delisted) finally went under. BearingPoint was spun off from KPMG in 2001 went into Chapter 11. BearingPoint web site shows an announcement that they have reached agreements with their creditors. There is something called “pre-arranged” debt re-structuring. The international subsidiaries will not be included in the proceedings and the company insists that they plan to continue providing all services to customers. The company generated spin headlines do not mention bankruptcy or even hint at financial failure.

There is something fundamentally unsatisfactory with a company of this stature whose DNA is from a supposedly reputable accounting concern going chapter 11. These guy’s have huge consulting contracts where they tell people what they should do. But they cannot operate their own business at a profit. The company has historically lost money. The shareholders are being wiped out. Other stakeholders must be in severe financial pain.

Where is the lawsuit to protect shareholders? If you cannot listen to the supposed high calibre of these accountants and consultants then professional advice is worthless or close to it. This company did not really do well for the past five years. The fundamentals were that expenses were greater than revenues. You have to ask if the offering and subsequent operation of BearingPoint was not gamed.

Transocean Needs to Re-visit Intangibles

Transocean (RIG) Q4 and year end results. They spent a lot of time explaining adverse impactors of the after tax variety. This was to be expected after they had re-domesticated themselves from Cayman Islands to Switzerland as well as completed a merger/acquisition.(Global SantaFe)

Where they seem to have missed the boat is on the write down of intangible values. They did take a hit totally almost $385 million for various impairment charges. But the balance sheet still contains approximately $8.1 billion of intangible values. This is approximately 50% of the equity book values and approximately 44% of its market cap.

Oil prices are down, economies are struggling, petroleum demand is off why not cleanse the balance sheet now and set yourself up for future growth. Now they will die the death of a thousand cuts as individual intangible asset valuations suddenly go through impairment tests. The stock is near the 52 week low this was the time to wash out the sludge. Board of Directors lacks foresight and fortitude.

AIG Slowly Wastes Away

AIG Financial Products Corp (AIG) does it again. They announced on Friday the sale of sale of its interests in two transactions and related commodity hedges from its energy and infrastructure book of business for total net proceeds of $60.5 million. The purchaser was not disclosed.

While they did announce the purchase price this time, they did not provide any details about losses, contingent obligations that survive closing or adjustments. They will grasp at a $60.5 million dollar sale to say that they are making progress on over $100 billion in support financing. $60.5 million does not even cover the opportunity cost of capital. So what kind of progress is this?