10 Signs from an Earnings Call that a Retailer is in Trouble

An incredibly satirical look at the potential, subtle, and even absurd signals within retailers’ public statements that deserve our pause, our careful consideration, and our critique.

Hello, out there.  We are now heading into week 4 of Omni Talk’s existence on this interweb thing.  It has been a fun ride so far.  Whoever said, “if you are passionate about work, it’s not work” was dead on.  Thanks to everyone for your continued support, readership, and evangelism.  Every time one of you guys shares or retweets the post it makes a huge difference.   Thank you.

Before today’s post, let’s quickly recap where we have been together so far.   Week 1 we used the analogy of Amazon to Dien Bien Phu to highlight and admit the growing problems facing retail.  Week 2 we went decidedly “off the grid” to analyze Murray Hamilton, reverse engineered bicycles, and condescending earnings call statements to point out that the situation facing retail is so complex that we all need to get out of our comfort zones to solve it.  Week 3 we touched on Moore’s law, examined the discipline of Product Management, and proposed reconfiguring our organizational frameworks in order to put ourselves in these new, more uncomfortable zones.  Now, today, week 4 we will look deep at a tool that you, the individual, or even your company can use to diagnose whether your company will ultimately shape the trajectory of the future of retail or be shaped by it.

This tool I call “The 10 Asinine Things You Don’t Want to Hear in a Retailer’s Earnings Call or Anywhere Else Too.”  Now before I begin I want to be clear about one thing — THIS IS SATIRE.   In no way shape or form, should this blog be viewed as a tool for investment planning.  It is a mass over generalization of an entire industry.   Satire is meant to evoke thoughts and feelings, leaving you to use your mind freely to determine your own actions.  If satire was bible, millions of Londoners would have read Jonathan Swift’s A Modest Proposal and would have started eating their babies to control population growth in the 1700’s.   Let’s not do that.  Let’s not eat our babies.  Although my two lovely offspring are available on a rent-to-own installment plan.  No warranty though.  Caveat Emptor!

With that out of the way, what follows is culled from nearly 20 years of experience in retail across many walks of life, from pouring over earning statements, listening to calls, reading articles, attending conferences and trade shows, to conversing with colleagues throughout the years, and, yes, even to speaking with management consultants (the last one is a dirty job but someone has to do it).

Maestro — drum roll please!

10 Asinine Things You Don’t Want to Hear in a Retailer’s Earnings Call or Anywhere Else Too

Watch Out #1 — Proprietary Product as Panacea

We already discussed this watch out in Retail’s Product Problem — Why We Need to Stop Thinking with Our Small P’s.  I will not beat the dead horse any further.  Proprietary product is a road to nowhere.  The economics of the argument do not hold up over time. It will never be enough to save a company.

Watch Out #2 — The phrase “Digital Strategy”

This watch out is one of my favorites.  It is especially great when the highest ranking officer utters these two words and then hands the microphone over to a lower level officer.  It’s even better when the head of stores speaks to his or her store strategy and then someone else in the alphabet soup of CIO/CTO/CDO/CMOI/CMOII speaks to the “corporate” digital strategy (CMOI = Chief Merchandising Officer, CMOII = Chief Marketing Officer).

“Digital strategy” is a big watch out phrase because it does not mean anything.  In today’s day and age, digital has to be woven into everything a company does.  As another mentor of mine (this time not Argonaut Silverdog) used to say, technology has to be thought of as a “material” that permeates throughout your entire operation, not as a “layer” that sits on top of or alongside of what you do.

Your strategy should be your strategy.  Digital may be a key component or tactic of unlocking the value potential of your strategy, but it should never be standing alone as a strategy on its own.  When you hear “digital strategy” it is a dead ringer signal that the discipline of Product Management within a company is not well understood.

Remember Product Management is the intersection of Experience Design, Business, and Technology (visual aid courtesy of mindtheproduct.com).


Hearing “digital strategy” pulled out of the intersection of this Venn diagram should give us all pause.

Watch out #3 — Curation

I HATE the word curation.  HATE HATE HATE!   My kids have to pay me a dollar every time they say it, I say it to every cat I see, “Hey Curate, Curate,” and I have ripped curate out of every dictionary I own (yes, I still own a dictionary).

My personal favorite: is when I hear things like: “We need to curate our assortment. Better curation will help us win.”

No fucking shit — you are a retailer!  It is your job to pick product for your stores, your website, your whatever.   It is like saying, “I’m a chef.  I think I should buy some ingredients today.”

What really worries me though is that people often times . . . no wait, seriously almost all the time in retail, equate “curation” with “less.”  That is wrong!   Dana Carvey spoofing the McLaughlin Group wrong.

Curation can mean “more” too.   A museum curator’s job is to present a museum. He or she doesn’t go into that task and say, “you know, I really only want to put the minimum of beauty in here.”  Some museum halls might have more art, some might have less — curating is just a fancy, highfalutin word for picking.

So why do we keep hearing this?  Because Amazon, Wayfair, and the like in e-commerce are winning with selection.  A lot of selection.  So much selection that it is hard for our human minds to absorb, especially when we have been so used to managing confined, smaller physical spaces for the entire history of retail.  It is therefore a natural, mental response when stressed and under pressure to say “wait, I can’t comprehend all this and can’t figure out how they do it, so the answer must be something I can understand.  The answer must be . . . less.”

Fuck no.

Sorry to swear but this gets my goat.  There is no right answer. The answer for each retailer, for each category, in your store, on your site, is constantly moving.  You can’t put a definitive number to it.  The real job is to use data to maximize the ROI on the assets you have — square footage, site real estate, etc.

What I am about to say is scary but it is possible that if you hear C-level officers talk extensively about curation there could even be a good chance they are doing it as a coping mechanism for processing the information their teams are providing to them. There is a chance it could be a de facto management tool masquerading as a strategy because of the mental limitations of the human brain.  A real cognitive response bias could be at play here.  Tread carefully.

Watch Out #4 — Confusing Prioritization with Narrow Scope

Watch Out #4 — Confusing Prioritization with Narrow Scope is the Deliverance, banjo-playing cousin of Watch Out #3 — Curation.  They both evolve from the same branch of the family tree.

Just as in #4, when people are overwhelmed with everything coming at them, the natural response is to want to narrow things down.   But it doesn’t mean the approach is right.

For example, if I need to get my kids fed, put to bed, teeth brushed, and kiss my wife, eat my own dinner, etc. I can’t say to myself, “You know, this is too much.  I think the kids can fend for themselves tonight”  or “you know what?  My wife doesn’t need affection today.” Nope.  I have to do it all. My kids are 2 and 4 years-old.  Left to their own devices they are Damien from the Omen.  And, my marriage is pretty important to me too.

Yet, we see business leaders frequently take this approach.  They will come in haughtily and say things like, “We had 100 priorities, and we have smartly narrowed that list down to 10” like we should drop down prostrate in front of them.  Okay.  Maybe?  But narrowing doesn’t mean right and prostrating myself in front of someone else hurts my back.

You can be broadly focused and prioritized.  Investment managers do it all the time.  It is called portfolio optimization.  Sure you can’t let the breadth become unmanageable, but if the priorities are right and have to get done, culling them down just for the sake of culling them down is a terrible thing to do (and with all the complexity in the industry shouldn’t we have more priorities than less right now?  Aren’t diversified strategies good for business?).

Do you think Amazon ever has a conversation where they arbitrarily want to focus on less?  No, they put the people and resources on the ideas they need to get done in the right proportion to the idea.  That is the right approach.  That is how a juggernaut comes to create all of this (some of these deals are pretty amazing too!):

Amazon 1

Save 20% on Select Home Services Leading Up to Prime Day

Get 4 months of Amazon Music Unlimited for $0.99

Amazon 2

Kindle – Up to 40% Off Kindle Unlimited

Prime Day 2017 – 30 Hours of Deals

Prime Members get 40% off Audible Membership from June 29, 2017 through July 11, 2017

Amazon 3

Shop Amazon Devices- Get up to $35 off Trade in your Kindle off a new one

Shop Amazon Devices – Introducing the All-New Fire Tablets Starting at $49.99

Shop Amazon Devices – Introducing the All-New Amazon Fire TV Edition, starting at $449.99

Amazon 4

Shop Amazon Devices – Introducing All-New Kindle Travel Bundles, starting at $199

Shop Amazon Devices- $30 off Certified Refurbished Amazon Echo

Shop Amazon Exclusives – Privé Revaux Eyewear

Amazon 5

Baby Registry – $100 credit towards diapers and wipes

Shop Handmade – The Wedding Store

Join SHOWTIME Free Trial

Amazon 6

Shop Amazon Gift Cards. Any Occasion. No Expiration.

Shop Amazon Basics – HDMI Cables

Shop Amazon – Used Textbooks – Save up to 90%

That is a shit ton of stuff (technical term).

Every single thing you see above is a defensive moat for the Bezos Castle too.  Had Amazon just said, “No, we just need to be the best damn e-commerce book seller we can be,” they never would have leapfrogged all of us.

Watch Out #5 — Innovation from the Core

If Watch Out #4 is the Appalachian cousin of Watch Out #3, then Watch Out #5 — Innovation from the Core is the genetically cloned sheep from the drinking water of the Chattahooche River.

I have heard this one frequently over the years, especially from people up on stage at trade shows too.  The tricky part in the belief that business innovation should be driven from within by your core people vs. separately through stand alone or R&D efforts is that context matters.

That context comes down to one simple strategic question though — is your business model stable or is it dying?

If your business model is dying, innovation from people who are focused on the core business does not stand much of a chance of working.

It is like pulling all-nighters at the office to make the keys strike harder and bolder on the typewriter.  Your blood, sweat, and tears might make your typewriter better, but if everyone wants to buy computers anyway, it really doesn’t matter and you probably will have shitty work life balance.

A better approach is for a company to challenge itself to disrupt itself, to empower tiger teams to have the authority to create something new outside of the established processes and cultural norms that generally hang like an albatross on the neck of so many companies.   Need an inspiring example to prove this point:  see Kindle.

R&D planning, budgeting, and intestinal fortitude are the key means to guard against this inward focused innovation through the core bias (more on this in future posts).

Retail companies that look to themselves and to iterations on their past successes and are also reluctant to discuss openly their R&D strategies likely have a leg in the hole already when it comes to navigating the next iteration of Moore’s law in retail.

Watch Out #6 — New Tech Ideas Spring Up Out of Nowhere

When I was in my early 20’s, I used to go to Vegas with my buddy Joe to play blackjack. Initially I thought I was really good at the game.  Little did I know I was terrible.

I thought I was good because the first three or four times I played I won, but I actually had no idea what I was doing.   I was splitting tens, hitting against a dealer’s 5’s and 6’s, essentially doing all the things blackjack fans know are just freaking stupid.  I was worse than Austin Powers, but I was somehow winning.

Then one trip Joe and I sat at a table with an asshole.  Every time I made a bad play, the asshole yelled at me.  He berated me, used profanity, and even threatened to beat me up. While I absolutely hated the asshole at the time, he did make me realize that Joe and I were in way over our heads (partially because we didn’t know how to play the game and probably even more so because I felt like a Polish cavalryman riding Mr. Ed against the asshole’s German blitzkrieg and his Mussolini meathead friends behind him).

So Joe and I went home and did what you would expect any two Stanford nerds to do — we went home and studied books.  We learned how to play the game the right way using statistics.  We learned how to employ strategies that had probability on their side, rather than just dumb luck.

I bring up this example because a similar phenomenon may be happening when companies talk about their technology initiatives.  There’s a tell when a technology initiative is a baller, face down, double down against a dealer six or the converse of forgetting to split your 8’s (for you blackjack neophytes — the former is a good move, the latter is not very smart).

The tell is when a tech initiative comes into earnings calls, PR releases, etc. out of nowhere or at a very early stage in its life cycle.   Companies generally only make four earnings calls per year to shareholders, and yet for some reason they sometimes feel this burning need to talk about the new payment app they just started piloting in Las Cruces, NM the month prior or some new Bangor, ME self-checkout system they installed just a few weeks ago.

When you see this happen, it does not make sense.  One, why would you tell your competition about something so soon?  Two, how do you know it even works?

Contrast this again with Amazon.  We, the public, know almost nothing about Amazon Go. Some things have leaked to the public, possibly even by Amazon to some degree, but honestly little of consequence has leaked so far.  Amazon smartly knows not to talk about it.  It gives them an advantage.  They will talk about it when they are ready, and, this is my favorite part, when they actually know what they have — when they actually know if they are sitting on two face cards against a dealer 6 or holding 16 against a dealer 10 and it is time to surrender.

Amazon’s approach begs the question — should the public ever really know about internal pilot programs before they reach scale?   It does not seem like it.  Doing so leaves feeding the PR machine as the only possible rationale.  PR is important.  But PR shouldn’t obfuscate.  PR might make the company and its leaders sound like they know what they are doing tidbits at a time, but we need more. We need to demand more long pole discussions about major technology and company initiatives and not settle for one off PR Hershey’s Kisses that are not substantial enough to use to make a S’more.

So, when you hear about some new, shiny tech pilot, take a moment and digest it.  Even if the earliest of early stage results sounds good, cross check it against the company’s technology track record and how you feel about the other watch outs on this list. Determine for yourself if it has strategic teeth or if it is just a flight of fancy that you won’t hear about again one year from now.

As my Vegas example shows, jut because you are winning doesn’t mean you are good — “even a busted watch is right twice a day.”

I got that from watching G.I. Jane last night.  And she was a bad ass, so it must be true.

Watch Out #7 — Traffic Measured as Transactions

This watch out is not so much a “be wary” as it is an “applaud it when you see it” call out.

The companies that have an understanding of traffic across a website and a physical location will have a leg up on the competition as the future unfolds.   E-commerce retailers understand traffic flow, conversion, etc.  Physical retailers not so much. Transactions can still be found as a proxy for traffic to a physical store.  But that is problematic because . . .


Transactions do not tell you how many guests came into your store and walked out. Transactions do not tell you what parts of the store customers visited.  Transactions do not tell you how long someone lingered in a given area of the store.  Transactions do not tell you when people walk to a shelf only to find it empty.

Yet, everything I mentioned above, an e-commerce retailer knows well.  Very very well.

As a result, there will come a day quite soon when “the smart people of Silicon Valley” will merge mobile technology, location technology, and data science to give retailers the same data driven, analytical understanding of a store experience that one gets from analyzing a website.  It is not far off either.

So retailers need to pivot NOW to start talking more overtly about traffic.  They need to start measuring traffic.  They need to start talking about point-of-sale system overhauls so that the foundation for the intersection of mobile, location, and data science can actually occur.

The “smart people of Silicon Valley” whether current e-commerce players or still unknown entrepreneurs realize just how big of an opportunity understanding traffic is. They will charge at it hard.

If you hear a bricks-and-mortar retailer speaking in traffic over transactions, applaud them.  If you do not, press them until you hear them do so.  If you try and you try, and they still refuse to change their approach, you may have a ticket on the Titanic.

Watch Out #8 — Loyalty Programs

This section has a chance to be one of the more controversial watch outs mentioned (be sure to leave comments if you agree or disagree).

Loyalty programs are the flavor of the month.  They have been around for years.  For many retailers, month after month, year after year, they are frequently hot topics of conversation.

We get it, they are important, but let’s not overestimate their importance and the amount of resources a company should devote to them right now.

Before I go further too, Amazon Prime is not a loyalty program.  While it instills loyalty, it is really a membership fee, similar to Costco.  I am talking about the over fascination with loyalty cards, rewards points, etc.

At best, these programs improve things on the margins.  They might add a little top line. They might add a little bottom line.  But, in 20 years of retail, I have never heard anyone say, “Man, I love that retailer because of their loyalty program.”

Agreed, a good loyalty program might keep a customer from switching, but skepticism abounds that a loyalty program is central to your core work in determining what your Retail Product or reason for being will continue to be in the future.

Said another way, a loyalty program isn’t going to get people into physical stores as e-commerce continues to take more and more share.  A company, therefore, needs to focus on strategies and ideas that are for more advanced — ideas that, as I alluded to in Retail’s Product Problem — Why We Need to Stop Thinking with our Small P’s, result from the intersection of store operations, e-commerce, merchandising, and supply chain.

Just to be clear again, I am not saying loyalty programs are not important.  They are.  I am just saying they should not be one of the top 2 or 3 things on which a company has its sights set.

As we saw in Sendin’s reverse engineered bike example, leaders, boards, shareholders, etc. could be focused on loyalty programs simply because they are easy to understand. When retail was humming along unchallenged for decades, marginal strategies like loyalty programs had their place because the business model of retail itself was not in peril.

Now it is, and so we need bigger ideas.

Watch Out #9 — Red Herring Performance Statements

Times are tough right now.  Companies need good news, so one can understand why this watch out happens   One great thing about retail is that it is pretty black and white.  Sales either exceed last year or they do not.

So generally I am wary of vague statements like, “We introduced this new (insert your product category here) and customer spend for the category is up 25% since the introduction.”

Is that good?  Hard to know.  It probably is factually correct, but be wary of using it as a data point for three major reasons:

1) If the same store sales performance for the category was really strong, the company probably would have reported the performance on a same store basis.

2) Seasonality can impact retail sales performance greatly.  So it is hard to tell if a performance indicator like the one above is due to a great strategy or is just the result of a natural draft off of a seasonal peak like Easter, Back-to-School, or Christmas.  One really needs to drill into the time of year to understand the statement fully.

3) We also don’t really know what the referenced baseline is.  For example, if a new line of product was coming, chances are inventory started to dwindle down as product was clearanced out, so the sales performance prior to the introduction might have been biased downward.  Also, we do not know the time horizon for the benchmark either. Is it a comparison made over a week?  A month?  A few months?  We just don’t know.

There is a fourth potentially more dangerous correlation at play if we see these types of statements as well.  If we start to see these types of statements that do not reference straight year-over-year comparisons within a specifically stated window of time and we also see negative quarterly results at the same time, take a big pause.

Take a big pause because it means the mainline strategies discussed did not move the needle on the total top line performance of the company.   The patient could be really sick.  Either the ideas weren’t big enough ideas to focus on from the start, or, if they were, something else even bigger could really be lurking underneath the covers.

If you see all four indicators, quite likely you have a red herring performance statement.

Watch Out #10 — The Word “Holistic”

“We need a holistic omnichannel solution.”  First gripe — the statement is redundant. Second gripe, duh.  A holistic omnichannel solution?  Oh, I don’t know, couldn’t we just be ok with a partial one?  To borrow from Jerry Seinfeld, “Why do we need maximum strength Tylenol?  Is strength not good enough?”

“Holistic” is a great tell, like if you were playing poker with John Malkovich in Rounders, and you notice he is beginning to munch down Oreos like a fiend.   It likely means every strategy or tactic employed in the past has been disconnected from the intersection of business, technology, and user experience  The pattern is likely to continue too.  Calling attention to anything with the use of “holistic” only portends that a company probably isn’t super comfortable with what they have planned going forward.  If they were, they would be talking in more specifics.

So now, to put this to a close, the above 10 Asinine Things You Don’t Want to Hear on an Earnings Call or Anywhere Else too is a tool, a rubric that could be used by anyone.

Boards, CEOs, individuals — sit down with it.  Use it like a checklist.  Evaluate what your company is saying on earnings calls, in public statements, in meetings, and even in the executive washroom.  Go down the list and ask yourselves, “How comfortable are we with our honest assessment against these watch outs?”  Grade yourselves 1 through 10.  I don’t care if 1 is highest or 10 is highest, just do it.

Companies have a responsibility to ask themselves if they are comfortable with their answers.  Too many jobs across too many locales across the nation are dependent upon really strong answers in response to the above.  Don’t go through the motions.  Don’t let inertia carry your company through from one quarter to the next quarter.  Sit down, pen in hand, and make your conscious determinations.  Don’t put it off like your annual physical.

Stop, pause, and do the colonoscopy that everyone hates but is always glad they did.

Consider it holistic medicine.

Be careful out there,



Breathe — you are done

Maybe even take a little Sarah McLachlan break

You deserve it

That song is so emotional for me.  It always reminds me of when my same good buddy Joe and I bought tickets to meet girls at the Lilith Fair in college.


Girls 0

Verified Nerdiness 1,000,00,000,000,000,000,000,000,000,000.



P.P.S. My content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment based on your own personal circumstances. You should take independent financial advice from a professional in connection with, or independently research and verify, any information that you find on this blog or any other website for that manner, and wish to rely upon, whether for the purpose of making an investment decision or otherwise.

Chris Walton is an accomplished Senior Executive with nearly 20 years of success within the retail and retail technology industries. He is well-versed in merchandising, store operations, inventory management, product design, forecasting, e-commerce, pricing and promotions, and tech product development.

Chris was most recently a Vice President with Target, where he led the retailer’s Store of the Future project and also ran the Target’s home furnishing division for e-commerce. He previously worked for GAP, Inc., as a Distribution Analyst and Manager.

Chris holds a BA in Economics and History from Stanford University, and a MBA from Harvard Business School.

He likes to dress as Darth Vader for Halloween, and his wife also frequently asks him to ask Alexa, "to turn off the music."

Leave a Reply

Subscribe to OmniTalk

Subscribe today for unlimited access to all of our videos, podcasts, interviews and behind-the-scenes content.

Thanks for subscribing!