All Articles

The New Headache for Retailers

Just before Thanksgiving, Best Buy stores and other retailers, like Apple, Nordstrom and Louis Vuitton, were hit by thefts perpetrated by groups and individuals, some wearing masks and hoods, in smash-and-grabs reminiscent of a military-style operation.

Apart from the obvious physical and psychological damage experienced by shoppers and store employees, investors might be asking how much of a toll these unfortunate events take on bottom lines and quarterly profit and sales.

Do Retailers Ever Know What to Expect? 

Using Best Buy as an example, shares are up 20% this year, thanks to Americans upgrading technology in their home offices, appliances, home theaters and their smartphones.

But just prior to Thanksgiving, shares of Best Buy stock tumbled in the biggest intraday decline since March 2020, at the start of the pandemic, citing rising shipping costs and weaker demand for electronics.

Bloomberg reported increased robberies by organized groups of thieves have added to an array of profit pressures. The actual cost: $720,000 for every $1 billion in sales, according to the National Retail Federation.

Unfortunately, some stores might have to shut down or relocate, due to skyrocketing insurance rates and security costs that, eventually, will be passed on to customers. Before that occurs, however, Cyber Monday eCommerce sales are predicted to be more than $11.8 billion, and Best Buy is likely to have a respectable share of that.

The Unexpected Struck

Thefts generally increase during holiday time, but these are more relentless and better organized as dozens of thieves brazenly rush into stores, brandish weapons, grab merchandise and flee the scene in record time.

When an investor has faith in a company, its management, and its prospects for the future, it might be safe to assume he or she doesn’t even think about these types of events affecting bottom lines. Are customers afraid to shop there? In Best Buy’s case, maybe, but brick-and-mortar and online Cyber Monday sales will continue long after the holiday shock wears off.

If customers and investors could predict the future, they might have shied away from mega-companies like Tylenol, Dow Chemical and ENRON, as examples from decades ago.

Investors never heard anything bad about them … until they did. And then, it was very bad.

Look at Why You Invest

Despite these unfortunate and isolated events, take a step back at why you invest.

Your Hefren-Tillotson financial advisor has undoubtedly said this to you once or twice already, “Investments that keep you up at night, regardless of how good they might be for your needs, are not the right investments for you. Besides, that’s our job.” As a guide, the Financial Planning Association says you should invest to:

Plan and reach your long-term goals for college, retirement or general wealth building. To do that, you have to free up money and that’s why you create a budget.

One way to tame the debt beast is to pay off your expensive credit cards or non-deductible consumer debt that is eating up your valuable investment dollars.

Set your goals by clarifying them first. It’s called “investing with purpose,” and it makes it easier to stick to your investment plan by using the income you would likely spend.

Last year’s winners could be this year’s losers, so don’t invest to seek the highest returns. This is yet another example of why it is important to create investment goals—to make informed and realistic decisions designed to accomplish your financial goals without taking on too much unnecessary risk. Remember, all investments carry some degree of risk.

Understand your own risk tolerance of each type of asset and investment vehicle. Your advisor knows your risk tolerance is partly a function of your investment goals—how much time you have to invest, other financial resources you have, and your own “fear factor.”

Get educated even when working with a financial planner. Isn’t it better to understand how different investments work, their potential returns, their risks, and how you can assemble them in a cohesive portfolio for your needs and goals? Then pay particular attention to investment risk, because even short-term risk might be high.

You can manage your expectations by understanding that in any given year, you might not earn the annual average return. You’ll earn more or less than the average. You can keep the fluctuations in perspective by knowing the historical average, one advantage of education.

To stay on course, you need a roadmap, more like GPS nowadays. Hefren-Tillotson designs the course for you with MASTERPLAN. This written plan navigates through good times and bad to eliminate investment ideas that don’t fit your circumstances. It is a living plan designed specifically for you.

Diversify your investment dollars among various asset categories with your investment goals in mind. Research has shown that diversification reduces risk, while at the same time, maintaining or even improving portfolio performance.

Need help? That’s what we’re here for. We’ve been assisting investors take control of their financial futures since 1948 and have pretty much seen it all. We would happy to help you. Contact Hefren-Tillotson today.

DISCLAIMER: Past performance does not predict future results. This report is based on data obtained from sources we believe to be reliable. Hefren-Tillotson does not, nor any other party, guarantee the accuracy or completeness of this report or make any warranties regarding results obtained from its usage. All opinions and estimates included in this report constitute the firms judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation to buy or sell the securities herein mentioned.

What can we help you find?