Anyone who follows retail stocks knows that investors are just as fickle as shoppers. Today’s darling — Michael Kors (KORS) — becomes yesterday’s news — Coach (COH) — and the merry-go -round continues.
Take Express (EXPR) for example. Since its IPO May 12, 2010, its stock has crossed above and below its $17 offering price on several occasions. In November 2012 it dropped precipitously close to single digits. Anyone who bought near those lows has made out like bandits, notwithstanding the 23% drop December 4 on Q3 earnings that were fine but also included lower guidance for the entire fiscal year. Essentially, a six-cent difference in earnings for the year eradicated almost $500 million in market cap in a single day.
There are two big differences between this year and last. First, there were 53 weeks last year compared to 52 in fiscal 2013. Secondly, the retail environment this year has been far more promotional in nature, leading to lower margins. On both these counts there’s not much a retailer can do except offer the best merchandise possible so that the bleeding is kept to a minimum.
Since going public, EXPR has experienced five months with stock declines of 15% or more; on two occasions — October 2012 and December 2013 — its stock declined by 25% or more. In August 2010, Express stock lost 22%. By the end of the year its stock was 11% above where it started in the beginning of August of that year.
If you’d bought at the end of August you’d have been up 43% by the end of 2010. If you bought 100 shares of Express at the end of the month in each of the four previous monthly declines (not including this December’s recent drop) today you’d have 400 shares worth $7,380, 19% higher than your cost. It might not seem like much, but done over 10-20 years it adds up fast.