Dueling Fools
Limited Choices
September 8, 1999
The Bear Rebuttal
By
In the last one of these brotherly battles I took part in, I took a moment to point out what I consider one of the classic red herrings of Foolish Dueling: the "but if." Writers use them in hopes that you'll accept their proposition based on an idea they constructed out of pure speculation. (Like, "But if So-and-so Co. (Ticker: SOSO) decides to turn its efforts toward colonizing Mars, it could make shareholders a ton of money.")
Here's lesson number two: look out for Duelists who trot out "the Internet" as if it's only a matter of time before investors realize every company out there has the potential for America Online-esque returns once they get plugged in and plugging away.
Anything's possible, sure. And far be it from me to make bold proclamations about the future of technology. But unless Rick or the good people at The Limited know a way for shoppers to try on clothes online, I just don't see how he can just set up The Limited -- or any apparel retailer -- as a "potential 'Net paradise" without further discussion. Or hasn't he ever wondered why, with so many industries and companies finding rapid and rampant success online, apparel retailing is virtually absent by comparison?
Consider this: cool-clique clothier Delia's <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DLIA)") else Response.Write("(Nasdaq: DLIA)") end if %>, which made its name in catalogs and clickthroughs, has committed itself to expanding its store base as a means for driving further growth. Well, doesn't Delia's also own most of online site network iTurf <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TURF)") else Response.Write("(Nasdaq: TURF)") end if %>? Sure it does -- so let's go back to a recent StockTalk interview I did in which the company's CEO said iTurf will be more concerned with advertising and content than commerce.
And by the way, Rick, I don't for a second believe that the surfers who swarmed Victoria's Secret's online fashion show were the least bit concerned with spending money on the fancy frillies. That you would even suggest that TyraBanksHalfNaked.com was overwhelmed by credit-card bearing ladies rather than the men of Delta House suggests to me that you'll be buying your wife Super Bowl tickets and a new chainsaw for Christmas this year.
So it's back to The Limited's stores, if you please.
I'll say it again: It's essentially a turnaround story where most of the best assets have already been pared.
Not only that, but there's a twist: The gem in the crown -- Intimate Brands -- can be bought elsewhere.
Retail investors know there's two ways to try to make money in the sector's stocks: 1) find a company that works and watch it grow, or 2) pick a company that's backpedaling, closing disappointing locations, and trying to fix its problems in hopes of revisiting past glories.
It's a free country, and you can invest any way you want.
But if you're going to open door number two, remember this: The Limited is anything but nimble -- even after closing hundreds of stores over the past several years. And closing locations, while nice, doesn't address the company's merchandising issues, which become increasingly important as we head into the fall.
The company could very well become a dandy investment given time; early indications are upbeat if not conclusive. But for Rick to present this company as a slam-dunk based on its remaining store lines and a little ".com proselytizing" seems, frankly, like a very limited outlook.
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Also Check Out the Duel Flashback: Foreign Investing