Creative Descruction and Pet Supplies

Capitalism, then, is by nature a form or method of economic change and not only never is but never can be stationary. And this evolutionary character of the capitalist process is not merely due to the fact that economic life goes on in a social and natural environment which changes and by its change alters the data of economic action; this fact is important and these changes (wars, revolutions and so on) often condition industrial change, but they are not its prime movers. Nor is this evolutionary character due to a quasi-automatic increase in population and capital or to the vagaries of monetary systems, of which exactly the same thing holds true. The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers, goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates. – Joseph Schumpeter in Capitalism, Socialism and Democracy

That’s a nice way to lead into two stories I saw this morning. The first is the earnings warning from Chico’s FAS (CHS). The company has been one of the top stocks for the past 10 years. In fact, CHS has beaten the S&P 500 for the past nine straight years. Not this year, however. The stock is down 20% this morning, and over 55% year-to-date.
The other story is from Patterson Companies (PDCO). The company reported a quarterly earnings decline this morning. For the July quarter, the company earned 30 cents a share, one penny less than last year. Bear in mind that Patterson used to churn out 20% EPS increases like clockwork. Seeing them struggle is quite a shock.

Posted by on August 24th, 2006 at 10:31 am


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