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 After months of uninspiring sales growth and recent disappointments
from Macy's and Nordstrom, shareholders of apparel sellers have had
little to be thankful for and face a challenging holiday season.
Retail sales were expected to grow by 3.7 percent in November and
December, declining slightly from the 4.1 percent growth in the 2014
year-period, the National Retail Federation (NRF) said in a forecast
reaffirmed on Sunday.
NRF's survey of 4,281 consumers showed shoppers on average spent or
planned to spend about $300 over the Thanksgiving weekend, which ran
from Thursday, Nov. 26 through Sunday, Nov. 29.
That is down from about $381 over the same weekend last year,
although the federation said those numbers are not comparable
because of a change in its survey's methodology. The survey also
showed an equal number of U.S. shoppers sought to buy items online
as they did in physical stores over the Thanksgiving weekend.
Shares of Macys and Nordstrom have reflected a shift by consumers
away from discretionary items like designer-label clothes and
cosmetics toward online spending and merchandise such as smartphones,
televisions, home goods and travel.
Macy's stock has plummeted 39 percent this year while Nordstrom is
down 22 percent and Tiffany & Co is 23 percent lower - all far worse
than the benchmark S&P 500 index's 1 percent gain.
On the other hand, Home Depot has surged 29 percent in 2015 and
discount store Dollar Tree is up 6 percent.
The S&P 500 retail index has risen 27 percent this year, with much
of that gain driven by its largest component, Amazon.com, which
continues to undercut brick-and-mortar rivals and has seen its stock
more than double this year.
Earnings expectations vary for the holiday shopping quarter; Lowe's
on average is expected to grow its earnings by 29 percent from a
year ago while video game store GameStop is seen growing earnings by
9 percent, according to Thomson Reuters data.
Gap Inc, which warned this month about weak sales and a strong
dollar, is seen posting a 24 percent drop in fourth-quarter
earnings.
"You really have to bifurcate between the largely apparel retailers
and hard-goods retailers," said Anthony Chukumba, an analyst at BB&T
Capital Markets.
His top picks include discount retailer Big Lots as well as Best
Buy, which specializes in the electronic goods consumers are buying
these days and also has a compelling valuation at 12 times expected
earnings. By comparison, Nordstrom trades around 17 times earnings
and Target has a price-earnings ratio of 15.
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Polls going into holiday season have been mixed: A Reuters/Ipsos
survey found more people planned to cut holiday spending than to
boost it, while Gallup reported Americans plan to spend an average
of $830 each on gifts this season, up from $720 a year ago at this
time.
U.S. retail sales edged up a meager 0.1 percent last month after
staying unchanged in both September and August, according to the
Commerce Department.
FBR technology analyst Daniel Ives and his team planned to visit at
least 25 Best Buys and other big-box stores over the weekend in New
York and other major cities to gauge consumer appetite for
Microsoft's Xbox One game console and Apple's smartwatch, launched
in April.
"It's not quantitative, but it gives you anecdotal data points that
become part of the mosaic of your thesis about whether to be bullish
or bearish on trends, names and products," Ives said.
Since 2008, early sales estimates following Black Friday and Cyber
Monday have had little or no bearing on retail stock performance for
the holiday quarter, according to a report by LPL financial.
The short-term performance of stocks in the week after Thanksgiving
has also been similarly inconsistent.
For the past three years, Wal-Mart Stores has lost as much as 3.9
percent or gained as much as 2.6 percent in the week following Black
Friday, according to Thomson Reuters data.
By comparison, the S&P 500 has been flat to up 0.5 percent in the
week following Black Friday for the past three years.
Amazon.com's stock performance in the week following Thanksgiving
has been even more erratic. It lost 8 percent last year, lost 2
percent in 2013 and jumped 5 percent in 2012.
(Additional reporting by Barani Krishnan; Editing by Bernadette Baum
and Jonathan Oatis)
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