For Retail, It Continues To Be A Story Of The Haves And Have-Nots


By: Spencer Israel

A google search of “Retail apocalypse” returns over 9 million results.

While the term has some cache to it—nearly 8,000 stores have closed this year per Coresight Research—it’s really become more of a misnomer. Retail isn’t in an apocalypse. It’s in evolution as traditional brick-and-mortar clashes with Amazon. And that means there will be clear winners and losers.

You don’t have to look very far to see the dichotomy. The SPDR S&P Retail ETF ($XRT), the largest retail ETF by assets, is down 5% year-to-date. The Amplify Online Retail ETF ($IBUY) on the other hand is up 19%.

So as the last few retailers release their second-quarter numbers—Five Below ($FIVE), Williams Sonoma ($WSM), Abercrombie & Fitch ($ANF), Dollar General ($DG) and Dollar Tree ($DLTR) are among those reporting this week—let’s take a look where the retail industry stands.

The Rich Get Richer

As with any industry in transition, the biggest players have used this opportunity to increase market share. In this case, the clear winners have been Walmart ($WMT), Costco ($COST), and Target ($TGT).

The three companies have seen their stocks rise an average of 38% in 2019 thanks to continued growth in the two areas Wall Street cares most about: same-store sales and e-commerce.

Walmart’s same-store sales grew 2.9% last quarter, the best in a decade, while Target’s rose 3.4%. Costco, which has yet to report earnings for the most recent quarter, saw SSS rise 9.5% in the January quarter. All three have also exceeded estimates for e-commerce growth in their most recent reports.

Clearly, the investments these stores have made in their online operations and diversifying their in-store offerings—Target recently announced a private label grocery brand—have investors pleased.

Department Stores and Apparel Are The Biggest Losers

In what has turned into an annual drumbeat, 2019 has seen the continued decimation of apparel companies and department stores.

While there are some outperformers—Lululemon ($LULU), VF Corp ($VFC), TJX ($TJX) and Ross Stores ($ROST) have all had strong years— the industries have largely continued to struggle. Keep in mind that the S&P 500 has returned approximately 15% in 2019.

Company Industry YTD %
Gap Inc ($GPS) Apparel & Accessories -38%
Limited Brands ($LB) Apparel & Accessories -36%
Foot Locker ($FL) Apparel & Accessories -33%
Urban Outfitters ($URBN) Apparel & Accessories -32%
PVH ($PVH) Apparel & Accessories -24%
Levi Strauss ($LEVI) Apparel & Accessories -23%
Ralph Lauren ($RL) Apparel & Accessories -18%
Canada Goose ($GOOS) Apparel & Accessories -16%
American Eagle Outfitters ($AEO) Apparel & Accessories -16%
Macy’s ($M) Department Stores -51%
Nordstrom ($JWN) Department Stores -39%
Kohls ($KSS) Department Stores -32%

Returns as of August 27, 2019

This weakness is reflected in the numbers. Urban Outfitters reported same-store sales down 3%, while Gap was down 4%. Foot Locker missed estimates on both earnings and sales for the quarter. L Brands gave downbeat Q3 earnings guidance and said a turnaround hinges on Victoria’s Secret. Macy’s lowered their earnings guidance for the year.

Even when the numbers are not ostensibly bad—Kohls earnings and sales were slightly above estimates and Nordstrom’s narrowed their previously issued earnings guidance—the stocks get punished. The sector is just completely out of favor right now.

The upshot: In order to survive, brick-and-mortar retailers have to show growth in their online sales. Unfortunately, not everybody can do that. For as long as that struggle continues, retail is going to continue to be a stockpicker’s market.

The author has no positions in any of the stocks mentioned in this article.

Active Trading with Lightspeed

Lightspeed provides active traders with all the tools required to help them find success in stock trading, and we have been developing and honing our active trader platform to offer the best possible user experience in the marketplace. With the intuitive interface layouts and institutional quality stock and options scanners, we aim to help traders reach their goals, no matter what their strategy is. We also offer our clients some of the lowest trading fees in the industry.

For more information on a professional trading platform with Lightspeed, please call us at 1-888-577-3123, request a demo or to open an account.

Lime Brokerage LLC is not affiliated with these service providers. Data, information, and material (“content”) is provided for informational and educational purposes only. This content neither is, nor should be construed as an offer, solicitation, or recommendation to buy or sell any securities. Any investment decisions made by the user through the use of such content is solely based on the users independent analysis taking into consideration your financial circumstances, investment objectives, and risk tolerance. Lime Brokerage LLC does not endorse, offer or recommend any of the services provided by any of the above service providers and any service used to execute any trading strategies are solely based on the independent analysis of the user.

You may also be interested in...

The IPOX® Week, September 16, 2019
Read More
LIGHTSPEED WELCOMES NEW FUTURES TRADERS WITH PIONEERING COMMISSION REBATE TRIAL
Read More
LIGHTSPEED OFFERS A LOWER MINIMUM FUNDING REQUIREMENT FOR LIGHTSPEED TRADER
Read More
What Moves The Precious Metals?
Read More

Try the demo

Compare Platforms
Check the background of this firm on FINRA's BrokerCheck

Our website uses cookies to improve the performance of our site, to analyze the traffic to our site, and to personalize your experience of the site. You can control cookies through your browser settings. Please find more information on the cookies used on our site in our Privacy Policy. By clicking OK, you agree to allow us to collect information through cookies.

OK