France’s Iliad reported to have put in offer for T-Mobile US
Thursday, July 31st, 2014 UPDATE: Iliad has reportedly confirmed that it has put in a $15 billion offer to gain a controlling stake in T-Mobile US. The offer is for $33 per share, or a 42% premium over the carrier’s stock price prior [...]

T-Mobile US continues strong growth, this time with improved financials
Thursday, July 31st, 2014 T-Mobile US’ impressive run of customer growth over the past year took a step back during the second quarter, though the nation’s No. 4 operator still managed to post strong growth and – more importantly – [...]

Sprint stems customer losses, squeaks out profit
Wednesday, July 30th, 2014 As has been a recurring theme, Sprint reported quarterly results that highlight its continued struggles through an ongoing network upgrade program, but hints that perhaps it could be set to turn a corner. (Sprint [...]

Why does my phone battery die so fast?

It’s a question that everyone asks. Your phone battery seems like it needs to be charged every day or even [...]

LatAm: Telefónica in talks to buy Mexico’s Isusacell; TIM to invest $1.8B in Brazil

In a new twist to the changing Mexican telecom market, Telefónica is reportedly in talks to acquire Grupo [...]

Cell Tower News: OSHA updates climber rules; tower data contention

01 August 2014 by Jarad Matula

Welcome to this week’s edition of cell tower industry news, created by Jarad Matula and brought to you by Towercrews.net. OSHA directive on hoisting In a new step towards safer practices on tower work sites, the Occupational Safety & Health Administration has issued a new directive that outlines stricter rules for inspectors to judge safety and […]

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Posted in News

U.S.

Anritsu reports flat revenues, profit impacts from R&D

Anritsu reports flat revenues, profit impacts from R&D

01 August 2014 by Kelly Hill

Anristu saw essentially flat year-over-year revenues for its first fiscal quarter ending June 30, but its profits for the quarter were down nearly 50% to about $8 million. Meanwhile, its revenues were $216 million, down less than 1% from the $218 million reported in the year-ago period. In its financial release, Anritsu noted that mobile […]

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Posted in Test and Measurement, test equipment

U.S.

Test & Measurement: Keysight Technologies begins operations

Test & Measurement: Keysight Technologies begins operations

01 August 2014 by Kelly Hill

Editor’s Note: The ability to test network and device features and functions is an important piece of technology development and deployment. RCR Wireless News looks weekly at the test and measurement space to see what’s afoot. —Agilent Technologies’ electronic test and measurement segment has officially begun operating as its own brand, Keysight Technologies. The spin-off of […]

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Posted in Test and Measurement, test equipment

U.S.

Alcatel-Lucent posts improved Q2 results, plans submarine cable IPO

Alcatel-Lucent posts improved Q2 results, plans submarine cable IPO

01 August 2014 by Sara Zaske

Alcatel-Lucent (ALU), which announced its “Shift Plan” a year ago, is now looking to shift some of its submarine cable business. When the Paris-based telecom equipment company released its 2014 second quarter results, it announced a planned initial public offering for the subsidiary scheduled for the first half of 2015. “Let me tell you right […]

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Posted in infrastructure

U.S.

Keeping the promise of bundled offerings

01 August 2014 by Kelly Hill

Liam Maxwell, VP of products for Oracle Communications, spoke with RCR Wireless about how the transition from single-service providers to bundled offerings has affected customer relationship management, BSS and OSS, and Oracle’s place in the ecosystme. “One of the biggest problems that communications service providers have had over the last decade is that they’ve shifted from […]

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Posted in Customer Care, Networks, Software

U.S.

Reader Forum: Future-proofing the mobile industry in the Internet of everything age

18 August 2014 by Sudarshan Krishnamurthi, Product Management of Cisco Services, Cisco Systems

To power all the IoE’s new revenue gains and improved experiences, the mobile industry will need IT staff who are keeping pace with the demands placed on the network.

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Posted in Opinion, Reader Forum

U.S.

Reader Forum: Using intelligent wireless routing to end to in-building over-provisioning

11 August 2014 by Wolfgang Weber, VP Business Development, Dali Wireless

In-building user experience and service quality are powerful differentiators in wireless services and providing reliable indoor coverage and capacity is not only expected, it’s demanded.

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Posted in Opinion, Reader Forum

U.S.

Reader Forum: The ‘5th C’ impact on two-way radios

11 August 2014 by Randy Helm, Director of Product Management, Motorola Solutions

All radios are known for their performance with the four basic “Cs”: coverage, capacity, cost and control.

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Posted in Opinion, Reader Forum

U.S.

Reader Forum: Five ways retailers can leverage the power of mobile

04 August 2014 by Sam Ganga, EVP Commercial Division, DMI

International research firm Latitude reports that 88% of people surveyed agreed that owning a mobile device with real-time information makes them more spontaneous in their shopping decisions. That fact alone

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Posted in Opinion, Reader Forum

U.S.

Reader Forum: The ‘Internet of Things’ ate my network

04 August 2014 by Christina Richards, VP, AOptix

The “Internet of Things" is either going to transform our world – or crush it, depending on who you ask.

Read the full story

Posted in Opinion, Reader Forum

From Our Editors

Worst of the Week: Sprint’s groundhog day

Freitag: A look at Kickstarter

Software: SDN support split; workforce management to benefit from cloud

Corning’s cable show

EMEA: Self-driving everything?

More Articles »

Commentary

Wi-Fi making transit in-roads by Kelly Hill

Analyst Angle: Connecting on connected cars by Iain Gillott, Founder and President, iGR

EMEA: Do users know when they’re in the cloud? by Claudia Bacco

Analyst Angle: Apple and IBM – a logical enterprise partnership finally comes of age by Bill Rom, Managing Partner, 151 Advisors

Reality Check: Mitigating network deployment delays and cost overruns by Tony Mistretta, Managing Partner and Co-founder, Vertix Consulting

More Articles »

Columnists » «

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Remember, Retailers’ Earnings Matter More Than Sales
There's a lesson for investors in the December retail reports: Strong sales without healthy profit margins are hardly good news.

Every year Wall Street make a big deal about the holiday selling season and the outlook for retailers, and every year investors collectively forget the most important point of this whole exercise: Stocks represent a claim on future earnings — not sales. Although a retailer can usually boost top-line numbers by slashing prices, it can also cut prices to the point where it begins to sell merchandise at a net loss.

This misplaced attention on sales rather than margins became evident yet again when the nation’s retailers reported December’s same-store sales figures Thursday. Same-store sales, which generally include only receipts from locations open at least a year, are considered a key measurement of a retailer’s health. And based on the latest figures, the patient isn’t doing as well as hoped.

True, Macy’s (NYSE:M) December sales beat expectations, allowing the department-store operator to lift its earnings guidance, raise its dividend and approve a billion-dollar share buyback program. But too many other major names look to have price-cut themselves into a margin squeeze.

Target (NYSE:TGT), the nation’s second-largest discount retailer after Wal-Mart Stores (NYSE:WMT), missed Wall Street estimates and had to cut its outlook. Midprice retailers J.C. Penney (NYSE:JCP) and Kohl’s (NYSE:KSS) also offered disappointing outlooks. And Gap (NYSE:GPS), the nation’s largest specialty retail chain, reported a larger-than-expected 4% drop in sales.

Overall, sales grew just 3.6%, according to Retail Metrics. Yes, that was fractionally better than Wall Street forecasts. But that figure doesn’t account for inflation, which rose 2.2% year-over-year in November, excluding food and energy prices. On an adjusted basis, retail sales may have produced almost no real growth at all.

It’s understandable that investors collectively become fixated on holiday sales. Consumer spending accounts for roughly 70% of GDP, and total retail sales, including more prosaic items like gas and food, account for about half of those outlays. From a macroeconomic perspective, holiday sales should say something about the state of the consumer.

Unfortunately, what the latest same-store sales figures showed was that consumers are as price-conscious and finicky about their spending as ever. The dollar stores continued to pressure the discounters, which in turn created price pressure on the midmarket stores. It was a promotional holiday selling season. Consumers have been trained — and now demand — sales and specials.

For a retailer, it’s a terrible tightrope act. Remember: Revenue equals units times price per unit sold. If you slash prices, you’ll sell more units. And if you sell enough additional units, the increase in volume will more than offset those lower prices, leading to an increase in total revenue.

But if a retailer sacrifices too much markup (or margin) on each unit, it can easily sell items at a loss. That’s why retailers (and retail investors) fret over something called gross margin, which is sales minus cost of goods sold. Essentially, it’s the initial markup on whatever the retailer is selling.

And ultimately, it all comes down to gross margin. Target, for example, has a gross margin of a bit more than 30% for the trailing 12 months. Not bad. But by the time the company got done accounting for all its other costs, it posted a net profit margin of 4.3%. In other words, an initial markup of 30% netted just a little more than 4 cents on the dollar.

That leaves retailers precious little room for error. A few poor choices in merchandise selection, with some heavy discounts to clear inventory, and the next thing you know, you’re selling goods at cost — or maybe even at a loss.

That’s why retailers measure gross margin in terms of basis points — or hundredths of a percentage point — and are thrilled by the most fractional of improvements. It seems absurd, but a 200 basis-point expansion in gross margin (or 2%) can make or break a retailer’s quarter. Such is the importance of selling goods at the fullest possible price.

The true verdict on the holiday selling season — at least for investors — doesn’t come until February, when retailers will report their fourth-quarter results. But by then, as always, the holiday selling season will be long forgotten.

As for now, it looks to have been a mixed picture at best. Luxury and off-price retailers continued to fare better than the stores in the middle. Discounting and promotions hurt too many companies’ margins. And, worst of all, those lower prices still failed to lure enough extra customers, traffic and volume to push industry revenue significantly higher.


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