The bloodbath in retail in the last couple of weeks doesn't seem to want to come to an end, with a dismal report from Best Buy (BBY), one of the best performers of 2013, today. The stock, almost 40 percent below its recent highs in November, isnt' alone. GameStop (GME), Express (EXPR), Five Below (FIVE), Ulta (ULTA), Sears (SHLD), Lululemon (LULU), Bed Bath & Beyond (BBBY) are just a few that have suffered.
This week marked one of the most pessimistic ICR XChange conferences in recent years. A couple of the disappointing themes that ran throughout the conference included a highly promotional holiday that has extended in January, weather blaming, mall traffic being down, and the 'commoditization' of products with difficultly when it comes to pricing.
So is anything buyable?
There's a new metric that is key to evaluate: Immunity from Amazon (AMZN).
A memo from Starbucks (SBUX) Chairman & CEO Howard Schultz pointed to issues in retail traffic, something we've known for some time but something which has been seen clearly of late. (I also, as an aside, think the worries over re overdone for this long-term health & wellness, global expansion and consumer products story. I would buy on any pullback).
The strength of this metric is one of the reasons that Macy's (M), which has mastered its omnichannel strategy, is doing well... along with names more immune to online competition like Home Depot (HD), Tractor Supply (TSCO) and AutoZone (AZO). A third group that is doing okay is one that is able to benefit from excess merchandise -- the off-price retailers like TJX Corp (TJX). And the fourth group that is doing well are the merchandise-right names with secular growth and category expansion like Under Armour (UA). And, by the way, I think those names are still well positioned here.
But in terms of the names that have sold off? Any where you can bottom fish? I think Target (TGT) remains well-positioned. As Goldman noted in its catalyst-driven upgrade, the impact of the recent payment card breach provides an entry point for a name that is cycling payroll tax increase along with less of a headwind from Canada. Second, Ascena (ASNA) remains well positioned due to its portfolio of brands including Justice in teens and the turnaround in Lane Bryant and Catherine's. That said, I would wait for this one to settle before coming in. Third, Pier One (PIR) continues to expand its online shift and is a beneficiary of the refurbishing trade we are seeing among the housing sector.
A treacherous space indeed, but some pockets of opportunity.
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