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Flying Blind In Retail

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You can add consumer giant Unilever to the growing list of companies no longer offering guidance. The maker of Knorr soups, Lipton tea and Dove soap, said it could not give a specific outlook for 2009 in current conditions.

And on Thursday morning Wal-Mart announced it would stop providing monthly sales guidance.

That comes after Intel , Verizon , Kodak, Starbucks , Microsoft and Sun also dropped formal guidance – and that’s just the tip of the iceberg. The number of companies declining to offer guidance has increased by 30% this earnings season.

How on earth can you value a company without guidance?

We’ve been raising that issue all week with top analysts. On Thursday we spoke with Sanford Bernstein analyst Colin McGranahan, the #1 ranked retail / hardlines analyst by Institutional Investor.

He told us the best way to determine the future of a retailer involves looking at leverage, as well as inventories because many products have short life cycles.

“On the one hand we look at what’s the direction of demand and how it’s changing then we take a look at see if the company is ahead or behind on inventory,” explains McGranahan.

Intrigued? To see our entire interivew with McGranahan watch the video now!


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Trader disclosure: On Feb. 4th, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Finerman Owns (PAL), (MSFT), (BAC); Finerman's Firm Owns (DNA) & (DNA) Calls; Finerman's Firm Is Short (IYR), (IJR), (IWM), (MDY), (SPY), (USO); Najarian Owns (CAT) Call Spread; Najarian Owns (EEM) Call Spread; Najarian Owns (FCX) & (FCX) Calls; Najarian Owns (ENER) & (ENER) Call Spread; Najarian Owns (GDX) Call Spread; Najarian Owns (MSFT) & (MSFT) Short Calls; Najarian Owns (MS) & (MS) Short Calls; Najarian Owns (MOS) Call Spread; Najarian Owns (DLTR) Calls; Najarian Owns (PALM) Calls; Seymour Owns (BAC), (EEM), (FXI), (MOS), (PBR), (CBRE)

Accounts over which Bernstein and/or their affiliates exercise investment discretion own more than 1% of the outstanding common stock of the following companies AZO / Autozone Inc, HD / Home Depot, LOW / Lowes.

Bernstein currently makes a market in the following companies BBBY / Bed Bath & Beyond Inc, SPLS / Staples.

The following companies are or during the past twelve (12) months were clients of Bernstein, which provided non-investment banking-securities related services and received compensation for such services LOW / Lowes.

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