Bear Case Scenario for Urban Outfitters. Not as disruptive as they need to be! $URBN, $XRT

Early days yet for Urban Outfitters. If as and when product ideas catch on they will be easily copied by bigger better resourced retailers.

High fashion and youth markets are incredibly volatile. It’s like walking around with a jar of nitroglycerine. Not sure why people do that.

High Capex in new stores, direct to consumer and inventory will drain capital.

Many different store experiences may create confusion. Management needs to figure out which pony they want to ride.

George Gutowski writes from a caveat emptor perspective.

Bull Case Scenario for Urban Outfitters. Guerilla Outlier or Important? $URBN, $XRT

90% or revenue is in US from about 500 stores. The expansion ramp is long and fat. Just sign up reasonable leases.

Brands and product lines are very differentiated and have strong pricing power which means good margins.

The diversification over five brands plus retail, wholesale and direct to consumer is making a compelling offering that shareholders should like.

George Gutowski writes from a caveat emptor perspective.

Bear Case Scenario for Citigroup. Big Bank Big Problems $C, $XLF

Many Asian and emerging markets are dependent on China which is looking shakier every day. Europe may not look so bad after all.

Citi Holdings will be a drag on earnings until further notice.

Citigroup is a large company and may be very hard to change. The majority of Citigroup employees will find it very hard to change their mindset. There are too many to fire at once. No one has ever changed employees one by one and survived.

George Gutowski writes from a caveat emptor perspective.  

Bull Case Scenario for Citigroup. Big Bank Makes Real Good. $C, $XLF

Citigroup is leveraged to grow with Asian markets. Other banks are bogged down in Europe. As Asia starts to dominate Citigroup will reap the benefits of strategic placement.

Citigroup is recapitalized and refocused under new management. This usually is a prescription for great success.

Capital will be returned with a stricter regulatory regime, tighter control over expenses and a shrinking balance sheet. In short Citigroup has dieted very well.

 

George Gutowski writes from a caveat emptor perspective.

Bear Case Scenario for Estee-Lauder and Cosmetics $EL, $XRT

Estee-Lauder has a huge reliance on Department Store sales. Department Stores are declining as more consumers buy in other ways.

The Lauder family exercises effective control over the company. There can be no thought of dissent from other shareholders. Eventually one of the rich lucky sperms will make a fatal mistake and destroy the franchise.

There is some Venezuela exposure which is causing short term heart burn. That is the flip side of international diversification. Some of the pieces will just rot out on you before you know it.

George Gutowski writes from a caveat emptor perspective.

Bull Case Scenario for Estee-Lauder and Looking Good $EL, $XRT

Estee-Lauder has well diversified international revenues. Some 15% come from very fast growth markets. 60% come from international markets meaning non USA sources.

Product development is being decentralized. This avoids the one big bet going wrong. Local customs and trends will be respected and exploited.

Efforts to diversify into internet e-commerce and travel channels is resulting in higher margins which will only make shareholders happier.

George Gutowski writes from a caveat emptor perspective.

JC Penney Bear Case Scenario for discount retailing $JCP, $XRT, $RTH

JC Penney is losing ground to Macy’s and other higher end retailers who are expanding their offerings and eating away at JC Penney’s franchise.

The lingering effects of recession and reduced government spending is still being borne by JC Penney core customers. Every time an Asian factory displaces America JC Penney and others pay the price.

JC Penney has lost customers. Getting lost customers to come back is very hard. Bad experiences rankle for years sometimes decades.

George Gutowski writes from a caveat emptor perspective.