Retail Stocks
Companies that cater to the public selling various goods are called retail stocks. This encompasses both large and small stores. Investors look at fashion trends, sales per square feet, the potential to open more stores, inventory levels, and same-store sales data. as well as the ability of retailers to generate loyalty among their customers.
America Today: The Rich Get Richer, the “Working Poor” Become Problematic
By George Leong for Investment Contrarians | Mar 21, 2013
The Dow is at a record high, and there is rejoicing on Wall Street in reaction to the stock market rally. In fact, the stock market rally appears to have made more people rich. A total of 300,000 newly minted millionaires were created from the current multiyear stock market rally, according to Spectrem Group. (Source: Frank, R., “US (and Booming Market) Adds 300,000 New Millionaires,” CNBC, March 19, 2013.) This is great news for the new members of the $1.0-million club (excluding primary residence), but the reality is that there continues to be a mass of Americans collecting food stamps—around 48 million according to USDebtClock.org—and they have not reaped any rewards from the stock market rally.
The headlines commenting on how America is becoming richer are myths; that is, unless you don’t care about the other 95% of Americans who are just getting by and the bottom rung of this group who are considered America’s poor, making minimum wage.
What is also alarming is the low saving rate, which shouldn’t be a surprise, given that income levels have flattened out and declined over the past decade. According to the Employee Benefit Research Institute (EBRI), a staggering 57% of workers surveyed said they had less than $25,000 in combined household savings and investments, aside from their homes. (Source: Greene, K. and Monga, V., “Workers Saving Too Little to Retire,” Wall Street Journal, March 19, 2013.) The survey also reported that 28% of respondents expressed no confidence that they would have sufficient money to retire in a comfortable manner. Trust me when I say this group doesn’t care about the stock market … Read More
To the Rich: The Luxury Retailers Need You
By George Leong for Investment Contrarians | Jan 25, 2013
The shares of luxury stock Coach, Inc. (NYSE/COH) plummeted by more than 14.0% last Wednesday. The stock is down 35.0% from its 52-week high, as the retailer of high-end designer handbags and accessories is struggling to achieve the sales growth that helped to drive the stock from the $2.00 level in 2000. Revenue growth in the second quarter was a muted 3.8%.
In the high-end retail sector, Coach is facing some spending slowing at its factory stores; if not for its strong sales of 40.0% year-over-year in China, the growth would be lower, according to the company. Same-store sales from China grew at double digits, while they declined 2.2% in North America. The growing importance of Asia is critical, since Coach owns and operates 402 stores in Asia. (Source: “Coach Reports Second Quarter Earnings Per Share of $1.23,” Business Wire, January 23, 2013.)
The showing from Coach indicates the current stalling in the luxury brand stocks in the retail sector, with the higher-end consumers appearing to be cutting back on spending.
Chart courtesy of www.StockCharts.com
The retail sector continues to be a difficult place to make money, and it requires careful attention and monitoring. There are trades to be made, but you need to be selective.
Discount and big-box stores continue to do very well, and in my view, they continue to be the space in the retail sector to make money.
The successful initial public offerings (IPOs) of Five Below, Inc. (NASDAQ/FIVE) in mid-July demonstrated the continued strong appetite for discount retail stocks.
Luxury retail stocks had been on a tear in 2011, but they have lost some luster … Read More
Why I Continue to Favor the Discounters
By George Leong for Investment Contrarians | Nov 2, 2012
I recently discussed the upcoming key holiday shopping season that officially begins with the critical Black Friday on November 23 and its importance to the retail sector.
Discounter Target Corporation (NYSE/TGT) reported a slower rise in sales in October and will be betting on the holiday shopping season when some retailers can generate up to 40% of the company’s total annual sales. (Source: AP, “Target October sales figure rises,” Yahoo! Finance from The Associated Press, November 1, 2012.)
Consumer spending drives the retail sector, economy, and gross domestic product (GDP) growth.
Retail sales for October, excluding drugstores (comprising of 18 national retailers polled by Thomson Reuters), surged a better-than-expected 4.7% versus the estimate of 4.3%. (Source: “Retailers Report an Upbeat October,” The New York Times, November 1, 2012.)
The pickup in the retail sector is encouraging; and with the current decline in gasoline prices, the pickup in jobs, and the growing strength in the housing market and prices, retail sales could be strong.
I believe the department stores and some of the specialty retailers will fare well; the key for success in the retail sector is selective picking.
My advice is to continue to stick with the leading discount bellwether retail stocks. In the large-cap retail sector area, the top companies are Wal-Mart Stores, Inc. (NYSE/WMT), Target Corporation (NYSE/TGT), and Costco Wholesale Corporation (NASDAQ/COST).
Costco reported a seven-percent jump in its key same-store sales reading in October, as reported on its web site. The results continue to show steady growth; but for that extra bit of growth, you should look at the smaller discount companies in the retail sector.
Costco, … Read More
How the Slowing Has Impacted the Luxury Sector
By George Leong for Investment Contrarians | Oct 26, 2012
The share price of luxury stock Coach, Inc. (NYSE/COH) is down 28.4% from its 52-week high; the retailer of high-end designer handbags and accessories is struggling to achieve the sales growth that helped to drive the stock from the $2.00 level in 2000. Coach is facing some slowing in consumer spending at its factory outlet stores, and if not for strong sales in China, the growth would be even lower, according to the company. Same-store sales from China grew at double digits versus a muted 1.7% in North America. The growing importance of Asia is critical with 317 Coach stores in Asia versus 523 in North America.
The slowing from Coach indicates the current stalling of luxury brand stocks in the retail sector, as higher-end consumers appear to be cutting back on spending.
The retail sector continues to be a difficult place to make money and requires careful attention and monitoring. There are trades to be made, but you need to be selective.
Chart courtesy of www.StockCharts.com
Discount and big-box stores continue to do very well and, in my view, they continue to be the space in which to make money in the retail sector.
The successful initial public offering (IPO) of Five Below, Inc. (NASDAQ/FIVE) in mid-July demonstrated the market’s continued strong appetite for discount retail stocks.
Luxury retail stocks had been on a tear in 2011, but have now lost some luster amongst investors in the retail sector.
Luxury jeweler Tiffany & Co. (NYSE/TIF), after beating Thomson Financial consensus earnings-per-share (EPS) estimates in three straight quarters, has fallen short in the last three consecutive quarters.
While Coach and … Read More
Go Cheap or Spend Lavishly?
By George Leong for Investment Contrarians | Sep 10, 2012
The retail sector is showing some strong results as pent-up consumer spending is showing some encouraging signs of release. Yet, as a retail sector investor, do you stick with the discount and big-box stores, or should you invest your capital in high-end retailers?
The key is to buy the retail stocks that show growth along with the economic recovery, whether they are big-box stores, discounters, or luxury retailers. Investors want growth.
On the cheap end, I favor the leading discount bellwether retail stocks, as I feel consumers will continue to look for bargains regardless of the improving market conditions.
This includes large-cap stocks Wal-Mart Stores, Inc. (NYSE/WMT), Target Corporation (NYSE/TGT), and Costco Wholesale Corporation (NASDAQ/COST).
For added growth, you should look at the smaller discount companies in the retail sector.
With superior growth to Costco, small-cap PriceSmart, Inc. (NASDAQ/PSMT) operates 29 warehouse clubs in 12 countries in Central America and the Caribbean.
A big winner last week was large-cap Dollar General Corporation (NYSE/DG), an operator of over 10,000 stores across 40 states. Dollar General beat on earnings for the fifth straight quarter. The stock has reasonable valuation and above-average, long-term price appreciation potential, a positive for investors looking at the retail sector. Currently, Dollar General is up nearly 50% from its 52-week low.
In the low-end area, I like Dollar Tree, Inc. (NASDDAQ/DLTR) and Family Dollar Stores, Inc. (NYSE/FDO).
And with the housing market ramping up, I expect spending in the retail sector to continue to increase, especially on non-essential goods and services reflected by durable goods. My favorites in the retail sector remain the discounters and big-box stores. The … Read More
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