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November Sales Data Yield Coal for TGT, M, SKS, ANF and Other Retailers


Retail stocks may still be in no better position than when we were seeing earnings reports last week. Today’s and last night’s slate of retail same-store sales for the month of November looks pretty dismal if you consider where we are in the bull market and how much all of these stocks have rallied. 

While most people feel the economy is still in recession, if you compare this November to last November, the comparable store sales should have been very easy. It was last September and October where the public and consumer spending fell off a cliff and stayed muted for months and months until only recently. This is particularly true of specialty retailers, but it is also the case at many larger chains and department stores. This data should give pause to almost all investors who are considering chasing these stocks.

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There are many reports out, and it is not possible to cover every single company out there. These show the poor figures and also compare them to Thomson Reuters estimates where available.

Department stores are specializing as discount stores. Macy’s (M) said November same-store sales were down by 6.1%. Saks (SKS) was so bad that they should be embarrassed at -26% versus an already dismal and low bar of over -20% in estimates. The one bright spot was Nordstrom (JWN) with a 2.2% gain, but that was right inline with estimates.

In the big-box retailers, the picture is not pretty as they are looking like they are discounting too much as well. Costco (COST) looked like a bright spot with a 6% gain in same-store sales, but the estimates were actually supposed to be higher because the North American gain was only 2%, and analysts were hoping for gains of over 8%. Target (TGT) said its same-store sales in November were down by 1.5%, and estimates were -0.5%. Unfortunately, we no longer get to see the monthly data from Wal-Mart (WMT) so we can’t even tell if the “trade-down economy” stock really won in the trade-down. Another trade-down is Kohl’s (KSS), and it was a winner on the surface at +3.3% in same-store sales versus estimates of +1%.

There were some just awful turnouts in specialty retailers. Maybe specialty retailers are now just discounters, too. Abercrombie & Fitch (ANF) is still without its old cool image as same-store sales fell by 17%, when estimates were “only” -9.3%.  Gap Inc. (GPS) was “only flat” versus estimates of +0.1%, but the Gap store brand in North America was -4% and a concern that things might not be turning around as fast as many have thought.  Aeropostale (ARO) was a standout player with gains, but ARO shares are sharply lower this morning.

What is interesting here is that the ongoing mountain of investor liquidity looking to buy stocks when they sell off and some slightly less-bad jobs data this morning is keeping these stocks from getting hit too hard. All of these are very close to 52-week highs despite the notion that they aren’t doing in performance metrics in the start of the holiday season. 

There is another interesting notion that is different in retail stocks versus tech stocks or other stocks. If retailers do poorly in this Q4 period, then there is no way for a make-up period as the Q4 period is ever-important for retailer earnings. And as noted last month, the discounting is hurting margins, and there are almost no cheap stocks in this sector compared to the market and compared to how much the shares have rallied. Retailers frequently have very low sales, and many even lose money if they do not manage inventory or have any issues in the middle of the year. It all comes down to Christmas and holiday spending for the big earnings. They call it Black Friday for a reason.

When you see these figures in same-store sales, it should be of little surprise as to why (AMZN) and even eBay’s (EBAY) PayPal data from Black Friday and Cyber Monday are keeping interest up.

It just feels like chasing these stocks at current levels is a bit like the dog chasing the mail truck. It is futile and usually not successful. Even if the dog catches it, it usually gets spanked.

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