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Friday, December 23, 2016 | B11
THE WALL STREET JOURNAL.
HEARD ON THE STREET
Email: heard@wsj.com
FINANCIAL ANALYSIS & COMMENTARY
Holidays Tax Retailers’ Willpower
Even the full-price stalwarts cave in to discounts the week before Christmas, and those that have been cutting prices slash even more. At high-end boutique Polo Ralph Lauren, everything was 30% off on Dec. 20 when Heard on the Street collected the latest round of data for its holiday retail pricing experiment. We are monitoring five items at each of the four stores—Macy’s, J.C. Penney, Ralph Lauren and Gap—to try to get a sense of whether retailers’ low inventory heading into the fourth quarter is actually helping them avoid discounting. The most significant shift was at Ralph Lauren, where an inexpensive scarf had been the only discounted item in our basket.
This week, the whole store was on sale, showing the lengths to which retailers will go to sell off their merchandise before even steeper post-Christmas promotions eat away at margins. The retailer’s discounting strategy may have been working at the store we visited on Manhattan’s Fifth Avenue. The red down parka and the black faux fur hat we have been following were already sold out there. Both are still available online—the parka at 26% off and the hat at full price. The scarf, which had already been marked down to $54.99 from the original $78, was $34.49. Perhaps most significant, the leather pants, which had been selling for full price at $998 since our experiment began, were marked down
with a sticker to $689.99. Take another 30% off that, and a savvy Christmas shopper could have bought them for $482.99 that day. A sticker typically means a markdown is set in stone. Even after the 30%-off sale ends, those pants won't go back to full price. Stickers also were coming out at some of the other retailers where we hadn’t seen them before. A pair of memory foam slippers at J.C. Penney, which had previously been marked down with a sign to $15.99 from the original $28, was stickered at $8.39 this week. At Macy’s, the few remaining examples of the Michael Kors handbag we were following bore stickers marking them down to $298 from the original $398. They had been selling at full price the previ-
ous week. That was noteworthy because the bag had swung from 50% off to full price the previous week, a change that Macy’s had attributed to the ability to sell at higher prices when supply is tight. This week’s discount suggests the department-store retailer didn’t have that much pricing power. The Fossil smartwatch also was discounted by 25% this week after regaining full price last week, but the discount was done via a sign as opposed to a sticker. Of course, a sticker isn’t the only sign that price cutting is getting serious. There were no stickers at Gap, but all men’s and women’s clothes not already on sale were selling for 50% off. Last week, the discount was 40%.—Miriam Gottfried
WSJ.com/Heard
Price Check None
1%–29%
In-store changes from original prices 30%–39%
40%–49%
All That Glitters is Goldman Change since the U.S. election 40% 30 20
Goldman Sachs Dow Jones Industrial Average
10 0 Nov. 8
Dec.
Source: WSJ Market Data Group
Investors have certainly taken notice, as the Dow Jones Industrial Average’s move toward 20000 shows. Maybe the most telling aspect of the rally is the 32% gain in the shares of Goldman Sachs, which accounts for 408 of the Dow’s 1,608point gain since Election Day. A little of that might be a response to how many Goldman alums will be wandering around the West
Wing—not just Mr. Mnuchin, but also Goldman No. 2 Gary Cohn (who got the nod to head the National Economic Council), former Goldman banker Steve Bannon (who will be Mr. Trump’s chief strategist and senior counselor). And Carl Icahn, who will help overhaul regulation. More broadly, it reflects a belief that the new team in the White House will treat financial firms with an easier touch than President Barack Obama. Mr. Trump’s vow to dismantle DoddFrank seems likely to go unfulfilled, but in surrounding himself with so many Wall Streeters the message seems to be that the 2010 financial-overhaul law will be lightly enforced. Mr. Tillerson’s nomination, and the picks of former Texas Governor Rick Perry for energy secretary and Oklahoma Attorney General
Scott Pruitt to head the Environmental Protection Agency signal a far friendlier regulatory environment for the energy sector. Strategas Research Partners estimates that there are $48 billion in U.S. private fossil-fuel energy projects that have languished as a result of climate-change concerns. Presumably, much of that money will be unleashed by the Trump White House. Mr. Puzder as labor secretary suggests the incoming administration will oppose efforts to raise the federal minimum wage, will reverse the Obama administration’s expansion of workers’ overtime eligibility, and will push back against workplace regulations. That would be particularly beneficial for companies in lowwage industries, such as restaurants. But while Mr. Trump’s
Sold out
Wavy cable-knit sweater Pendleton fringe scarf 2-in-1 hooded parka Camo slim-fit utility pants† Crazy stripe utility tote
-30 % -40 -30
-40% -70 -40 -40
-58 % -70 -40 -40
-50 -50
Lee curvy-fit pants J.C. PENNEY* Isotoner gloves with SmarTouch
-30
Liz Claiborne puffer vest St. John's Bay cable-knit sweater Dearfoams memory foam slippers
-50 -44 -43
-30 -50 -50 -44 -43
-30 -50 -50 -50 -43
-30 -50 -50 -50 -70
Michael Kors ‘Selma’ satchel Calvin Klein striped lace-up sweater Tommy Hilfiger ‘Graham’ corduroy pants Burberry emerald check cashmere scarf Fossil Q Wander stainless steel smartwatch
-25
GAP
MACY'S
-13
-50 -30 -30
-25 -30
-25
-28 -25
Black leather straight pant Rib-knit ragg scarf Waffle-knit cashmere sweater
-30
-30
-52 -51 -30
*Additional 25% off all items with coupon on Dec. 6 †Buy one, get one at 50% off on Nov. 29 Source: the retailers THE WALL STREET JOURNAL.
business-friendly cabinet ought to help out the bottom lines at many companies, it will only help so much. The strength of the economy and the level of short- and longterm interest rates are what matter most for financial companies. Oil prices, which are set by global markets, are the major issue for energy companies. And labor costs are dictated by the supply of available workers. And then Mr. Trump’s campaign rhetoric could hurt as well, either because limiting immigration drives up wages or because abandoning his populist agenda hurts his political clout. The danger for investors is that in their enthusiasm for the regulatory environment Mr. Trump’s administration is heralding, they aren’t paying enough attention to the things that really matter. —Justin Lahart
OVERHEARD Not even Oprah Winfrey is exempt from diminishing returns. Shares of Weight Watchers International surged 15% Thursday morning after the company announced a new ad campaign in which Oprah will reveal she lost over 40 pounds since she began the weight loss program last year. However, the extra pounds Ms. Winfrey has shed haven’t given the shares much of an extra boost. Despite this morning’s rally, the stock isn’t far from January’s price, when she announced she had lost 26 pounds on the program and is worth less than half of last year’s high, which came shortly after Ms. Winfrey announced she had taken a 10% stake in Weight Watchers. Stockholders will need more than Ms. Winfrey’s continued weight loss success if they, too, want to live fully.
CLASSIC FUSION AEROFUSION LIMITED NEW YORK EDITION
www.ebook3000.com
-58%
RALPH Red down parka with faux fur hood LAUREN Black faux fur hat
What Trump’s Cabinet Picks Mean for Markets If it wasn’t clear already, the people that Presidentelect Donald Trump is slotting for his administration have emphasized that he aims to be extremely shareholder friendly. The question facing investors is what sort of value to place on that friendship. Never before has a U.S. president stocked his cabinet with as many businessmen as Mr. Trump is aiming to. While putting up a Goldman Sachs Group alum like Steven Mnuchin for Treasury secretary counts as almost status quo, tapping Exxon Mobil Chief Executive Rex Tillerson for secretary of state and fast-food chain executive Andy Puzder as labor secretary shows how highly Mr. Trump values business experience—and how focused he is on reshaping the regulatory environment in businesses’ favor.
50%–70%
Nov. 29 Dec. 6 Dec. 13 Dec. 20