The Country Is Under Attack

crocs.JPGAs those of you who read the increasingly relevant A2 this morning already know, economists are now losing more sleep over subprime than terrorism. Yes, they believe that the threat posed to the United States by mortgage defaults and heavy debt loads is bigger than that of us being attacked by Canada, which I’ve long suspected is up to no good around the VT/CA border, even though they feign innocence when you ask them what they’re doing there and claim to just be trying to make it to UVM to score pot. This just goes to show you that economists are out to lunch, and wouldn’t know what the biggest threat to the country was if it bit them on the ass. Since we apparently have to do everything around here, let us step up to the plate and bite those economists’ asses: the biggest threat to the United States isn’t terrorism or subprime—it’s the fact that Crocs, the maker of those hideous, hideous eyesores (which, coincidentally, are favored by terrorists and subprime mortgage holders alike), is up 3 percent, on the news that the company will now expand its reign of terror into clothing lines for men and children. If you love America, go short Crocs now. Otherwise, the terrorists win, and you will probably have testify at Osama’s war-crimes trial.
Sidebar to the econs: when you were coming up with subprime as threat numero uno, did you stop and think, “Is this something that can somehow be blamed on Saddam Hussein?” Since we know you weren’t aware that Sadd’s brother Ahmed ran the Sacramento office of Countrywide, which was responsible for 33% of new loan generation, we’re going to go with “No.” Amateurs.
Crocs Shares Rise on Clothing Plan [CNBC]
Defaults Bigger Threat for U.S. Economy than Terrorism [CNBC]

The Reality Gap

mind the gap.jpg Faced with a case of recurring ad-failure amidst tanking same-store sales, Gap is taking the crazy cool notion of shunning TV in a revolutionary new print-only campaign.
The Laird & Partners campaign is revolutionary because it features relatively obscure personalities wearing Gap clothing. Personalities as obscure as John Mayer, Lucy Liu, Forest Whitaker and Selma Blair. We’re confused. So the new print-only Gap ads will have really famous people wearing Gap clothing. Sounds like a revolution to me, or the most common clothing ad there is. Yes, people get paid big money to come up with these ideas.
One of these men, Trey Laird, president of the ad firm that bears his name, comments that the people in the new Gap ads “are not the most expected choices, they’re not in Us Weekly every week.” Rather, they are in Us Weekly every other week. It seems like Gap is spending more time marketing the fact that its new ads are edgy than its actual clothing, as we look for clues as to why the chain’s sales stink.
The ad wizards mulled it over and realized that maybe they do have a tired, generic concept. That’s why the pictures will be in black and white and shot by Annie Leibovitz, best known lately for making Queen Elizabeth II look like she was in the Matrix. Sprinkle in a few people who aren’t as famous as the dude dating Jessica Simpson, like the director of “An Inconvenient Truth,” and you get your revolution… or a dressed up offshoot of 90% of clothing ads.
Gap Tries a Somewhat Old-Fashioned Campaign [New York Times]

Dubai wielding Istithmars against US

BarneysNP.jpg Finally, angry consumers are given a reason why the designer burqas sold out so quickly at the last Barneys sale (yes, the D & G spring line is maim-resistant, primarily because it’s acid-washed already). After months of negotiation, the Jones Apparel Group is close to inking a deal that would sell Barneys to the Dubai government-backed PE firm Istithmar. Jones CEO Peter Boneparth was integral in the purchase of Barneys three years ago for $400mm, but was criticized for the move at the time, with several insiders saying the deal was like paying full retail for a Prada dress.
The sale is partly in response to struggles in Jones Apparel Group’s moderately priced apparel brands and flagging shoe business through the Nine West chain.
Istithmar, taking advantage of oil prices and weakness in the dollar, continues to gobble American assets that now include discount retailer Loehmann’s, the NY branch of the Mandarin Oriental and a couple of note to self: non-targets NYC buildings (230 Park and 450 Lexington).

Unseasonably seasonable May drags down sales at Macy’s

singing in the rain.jpg Covered in Opening Bell, the unseasonably seasonable May this year has retailers and companies in any other struggling industry scrambling to find excuses for lagging performance. Macy’s, with same store sales off 3.3% from last year and 1.9% off analyst estimates, hedged its bet on an unseasonable May by acquiring a crappy department store chain with the same name, so it could blame May no matter what happened.
In fact, Macy’s has been blaming May Department stores, which it acquired in August of 2005, every month for struggling sales, claiming that it tried to “reduce discounts” at May chains too quickly (or people in the Midwest will not fork over $300 for a stainless Norman Rockwell print pashmina juicer). Macy’s has come in with same store sales below guidance estimates for the past four months.
If you want to hear corp-speak for “although our performance sucked balls in May, there are many other months in a calendar year in which we could potentially loosen our lips-first grip on the giant balls of bad retail performance we are currently sucking,” here is Macy’s official response, from the New York Post:

“While we were disappointed with sales in the month of May, the increased promotional marketing support currently being implemented for the Macy’s brand is expected to improve sales trends in June and July. You know what they say, May flowers bring June allergies, but fortunately our business plan is the Claritin of the retail allergy season, even though the aforementioned flowers of May never quite bloomed for us. If I stick with the metaphor long enough I plan on at least lulling you to the point where I don’t have to present any actual numbers.” said Terry Lundgren, Macy’s chief executive officer.

Of course, Macy’s expects June sales to be down 2% from last year.
Investors are in a tizzy, as they keep trying to sue Macy’s for concealing problems with May integration, thereby inflating the company’s stock price. Macy’s shares dropped 3% yesterday. Macy’s is up 13% since the May acquisition in August 2005, but that is considerably less than several industry peers of the department store chain over the same period.
MACY’S SLUMPS [New York Post]

The Sony Blu-ray BDP-S300 player, already flying off the shelves at the speed of irrelevance, is now $100 cheaper, representing one of the fastest price declines in the consumer electronics industry, the Wall Street Journal reports. Whereas the old price of $599 certainly Blu, it’s unclear whether consumers will exactly jump on the less costly device, as it still isn’t as cheap as the equally un-purchased Toshiba HD DVD players which retail for less than $300. The media disc format wars are still in limbo, with Playstation 3 not yet tilting the balance in Sony Blu-ray’s favor, although Hollywood insiders claim that Blu-ray has the most support thus far.
Sony Lowers Price Of New Blu-ray Player [Wall Street Journal]

Large Gap between expectations and retailer’s earnings

Did you avoid rushing off to Gap last month to buy a pair of boyfriend trousers because you filled your (March) Easter basket with them or because it was chilly? That’s what Gap is scrambling to say after releasing April numbers well below expectations today. Same-store sales fell dramatically (16%) and total revenue took a 11% nose-dive from the same period last year. Old Navy experienced the most performance fleece anxiety, with same-store sales dropping 20%. Profit margins shrank, due in large part to large spring clearance sales.
A parody of the boyfriend trouser ad:

Gap’s margins narrow as sales tumble [MarketWatch]