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.

JC Penney Bull Case Scenario for an American Icon $JCP, $XRT, $RTH

JC Penney liquidity and cash flow is sufficient to pull it through the crisis and return it to prosperity.

As new merchandise flows through margins will improve and bottom line will start looking better.

Promotional sales are better structured. Instead of just giving it away sales are having positive impacts on bottom lines.

George Gutowski writes from a caveat emptor perspective.

Wal-Mart Bear Case Scenario for Every Day Low Prices and Cheap Quality $WMT, $XRT, $RTH

If Wal-Mart needs to invest gross margin in maintaining market share the shareholder will be penalized. Given the large cash resources there are better things to do than cut price and screw shareholders.

E-commerce is outside of any core competencies that Wal-Mart may have. The low budget shopper can only buy cheap shoes once. On-line or bricks and mortar. So a strong on-line presence will hurt bricks and mortar stores.

75% of outlets are in foreign markets where Wal-Mart has operated for less than ten years. Return on capital has not meaningfully increased. Wal-Mart is not an established fixture in many foreign markets and can still blow its brains out. Look at red ink experiences in Germany, Korea and Japan. India is a big gamble and will prove to be disastrous.

 

George Gutowski writes from a caveat emptor perspective.

Wal-Mart Bull Case Scenario for Cheap $WMT, $XRT, $RTH

Wal-Mart roll outs of new Neighbourhood and Express Stores will compete more effectively for the core low-budget customer.

Wal-Mart remains the low price leader in food and merchandise. They can ward off any competition by more discounting as they have the cash resources to fight long price wars.

Wal-Mart is positioning itself in the on-line segment and should do very well when they get it right.

 

George Gutowski writes from a caveat emptor perspective.