Interview: Overstock.com---Byrne, Patrick---Chief Executive Officer
>> we continue our coverage of holiday retail, now focusing on the outlook for online retailers this holiday season. will high gas prices encourage consumers to do their shopping from home and how could increasing shipping costs affect margins? joining us with insight is patrick byrne, president of overstock.com, an online shopping site, joining us from salt lake city. thanks so much, patrick. let’s talk about this term “cyber monday” which i hadn’t heard about until today. what are you expecting for sales on cyber monday?
>> typically, the last two or three years, the monday after thanksgiving is the biggest or second biggest day of the shopping season. the biggest comes around june 13 -- i mean december 13 to 15. another interesting dimension of it is it’s typically men―what we’ve discovered is women are skewing earlier and earlier. they go online starting in early november and start doing their shopping. men are the guys who start really shopping cyber monday and on.
>> it’s still pretty early in the season, they can still get relatively cheap shipping rates. as it gets closer to christmas, do you find that your online retailing goes off a little bit because of shipping rates increasing?
>> not for us. what we do, is we start giving free expedited shipping on specially marked products. we usually surge around the 15th, 16th, 17th of december because we’ve always focused on picking clean, which means somebody can come in and order late in the season and we can still get it to them by christmas and we expedite for free a lot of the more expensive products, it makes economic sense for us.
>> we have been hearing about the gimmicks and gadgets and things offered including wake-up calls by kermit the sfrog for regular retailers. what are online retailers doing to attract customers?
>> most of them today are doing different shipping promotions. we have a dollar shipping promotion. most days, shipping is $2.95 for your whole order on our site. it doesn’t matter what you order, big screen tv, bed, whatever. today, it’s $1 for no matter how much you order. my research shows that amazon may be discounting books more aggressively than expected.
>> you mentioned amazon and books. i know that’s one of the things that does well with online shopping. what other products sell best online?
>> for us, we’re having―we have a lot of fine leather luggage that’s doing very well. a lot of fashion and accessories, meaning, very high-end clothing, armani and so forth. mulholland brothers luggage. we also have a diamond business that’s moving and all month we’ve been having corporate gifts, especially fruit baskets doing very well. and yesterday we announced something, the first of its kind, we have chrysler crossfires. you can go to our site, print off a coupon and it saves you from $7,000 to $9,000 with the coupon so you go to the dealer, no haggle and purchase the $30,000 car for $23,000.
>> better than a wake up call from kermit. what are the gas prices really doing to affect consumer shopping online? do you think they’re having an effect?
>> i do. i do. i’m fairly well insulated because i don’t drive very much but i’m amazed how much -- people are really cog cognizant of how much they’re spending to go to the mall. plus, i think that going to the mall is a hassle. i’ve done it maybe once in the last year and i just can’t believe, in my view, how low quality a shopping experience it is versus going online and buying something. we’ve had a surcharge―all of the carriers are adding a fuel surcharge to the etailers but we’ve decided not to pass it on to consumers. there’s no fuel charge baked into our pricing. but i think last year and especially this year, looking back people will say that’s the red letter daydate when online shopping stopped being a novelty but the first approach for many to the holiday.
>> how’s your auction site doing?
>> it’s actually―well, we will have done about $30 million this year, a little bit less than i hoped. but it seems to be picking up in the last couple of weeks, in particular because we’ve merged the search results with shopping so if you search for platters, you’ll find all of our discounted platters, our c.d.’s and dfted on the platters and the platters from the auction site merged into one result. that helps the demand for auction.
>> thank you very much, patrick byrne, president of overstock.com. when “after the bell” continues, the international olympic committee is promising zero tolerance and increasing drug test requirements for the 2006 olympic games in italy after a record number of dopg offenses.
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Listen Market briefing --- June (slow)
NYSE --- Deb (fast)
Bull market --- Daniel (slow)
“after the bell,” i am june grasso. let’s recap the shortened day on wall street. we start with the dow jones industrial average which closed up 16 points to 10,932. going along to the s&p 500, up three points to 1268. and finally, the nasdaq, up three points, as well, to 2263. it was a shortened trading week with the holiday, but that didn’t stop the major averages from posting some nice gains. deborah kostroun has more from the new york stock exchange. deb?
>> thanks a lot, june. of course, this week, it was a shortened trading week. we already closed in the dow jones industrial average here at the new york stock exchange, all the stocks closed at 1:00. looking at the dow for the week, up 1.5% for the week and that is now five weeks in a row that we’ve been seeing gains so that’s our best streak since september 2004 in the dow. the s&p 500 up 1.6% for the week, five weeks in a row, as well, on the gains there. so it’s our best streak since july. and the nasdaq was up 1.6% for the week and that was the longest streak since january of 2004. and as we’re talking about how we did for the week, take a look at how we’ve been doing so far this month in the major averages. the dow up 4.8% for the month, the s&p up 5.1% and the nasdaq posting a really good gain, up 6.8%. the s&p up over 5%, what we’re looking at, our best month in about two years. looking at what has been gaining this month, you have semiconductors, they’re up 13% for the month. those, some of the biggest gainers. one of the things we’re hearing about from semiconductor companies is they’re seeing a lot of growth in chip sales driven by demand for portable music players, mobile handsets and other electronic gadgets. consumer durables performing well. mattel this week saying it will increase its share buyback by $250 million and they left lift of lifted their annual dividend by 5 cents and transports hitting a record as jet fuel and oil prices have been falling. laggards so far this month, all of the auto-related stocks among the biggest laggards. also, food, tobacco and retail up just slightly. also, utility stocks up just slightly. you about the gainers this week pretty much mimics what we’ve been seeing all month and that was really semiconductors performing well, energy stocks performing well and also auto stocks. this was actually for the week although the auto stocks were the worst performers in today’s session.
>> thanks so much, deb. the bull market for u.s. stocks had its third anniversary last month and some strategists are saying the end is near for the rally, citing historical rally on the past bull market cycle showing this one is on borrowed time. daniel houck has been reviewing the data and he’s joining us to share what he’s learned. what suggests that the bull market is running out of time? is it just history or some other things?
>> just from a historical perspective, for investors that like to take their cue from history, from three different perspectives, the length of the stock market rally itself, the length of the economic expansion and length of the profit expansion, we’re looking a bit stretched. the current stock market rally is now over 1,140 days which means it’s almost a year longer than the average since world war ii. and a lot of what’s spurring the rally is a strong economy. right now we’re in the 48th month of economic expansion which is nine months short of what average economic expansions have been since world war ii. the stock market tends to anticipate economic downturns about six to eight months ahead of time so we could be running up against that barrier at the end of the year and finally, the expansion in corporate profits. for this quarter, analysts expect corporate profits to rise 12% to 13%, the 10th straight quarter above 10%, the second longest streak since 1950. so if you look at all those factors, you have some investors and strategists wondering how long it could continue.
>> suppose you were going to be an optimist, what is the case for the bull market continuing?
>> the case has gotten stronger in the past month. we talked today, with the advance we’ve had this week, much has been spurred by the pullback in oil prices and signs the fed may be close to ending its series of rate increases and these are factors that have really weighed on the market in the first part of the year and kept it from advancing further. you also have to remember that stocks tend to rally at end of the year. the s&p 500 has rallied eight of the past 10 decembers. and it’s not unprecedented for a rally to continue much longer. the rally we saw in the 1990’s lasted over 2,800 days so there are examples in the past where we have continued longer than the current rally. >> the latest leg of the rally, what’s the most interesting thing?
>> there’s a couple of things, one thing that could make investors more optimistic, this leg of the rally, especially since the end of october, has been spurred in part by retailers coming back, given the decline in oil prices and a little better outlook for consumer spending. also, financials have been doing quite well and that would make sense because of the anticipation that the fed might be ending its series of rate increases. the negative is that the breadth of the rally hasn’t been as good as we saw last week. there’s more stocks hitting 52-week lows than 52-week highs and that’s a reason for concern among some investors. >> thank you for joining us. still ahead, shoppers may be in stores today but many will be on line after the weekend. we’ll tell you what retailers expect from cyber monday. the president of overstock.com up next.
