by Alyssa Oursler | December 4, 2013 9:56 am
Cyber Monday might have resulted in record online shopping, but weak Black Friday sales weighed on the important Thanksgiving shopping weekend — and on retailers like Express (EXPR). In fact, investors poured a bucket of cold water on what’s been a hot year for EXPR stock, sending shares 20% lower at the open.
Before this morning’s beating, shares of Express were more than doubling the broader market in 2013. EXPR stock had soared over 63% from Jan. 1 through yesterday’s close.
But while EXPR stock may be getting pounded the hardest today, it’s hardly the only retail casualty so far in the 2013 holiday shopping season.
Investors in retail star Express — which was spun off from L Brands (LTD) in 2007 — decided to take their gains and run after the company lowered its full-year outlook. More specifically, EXPR stock investors were probably concerned by the fact that “Thanksgiving week sales exceeded last year’s levels but didn’t meet expectations,” as MarketWatch put it.
New Express earnings estimates are for just $1.46 to $1.51 per share of EXPR stock this year. Previously, the company has a range of $1.52 to $1.60 on tap. Meanwhile, analysts had been even more optimistic — and likely even more disappointed when the new numbers came in. Their consensus estimate was for earnings of $1.61 per share of EXPR.
As Express CEO Michael Weiss explained, the company had been “planning for a promotional holiday season,” but now expects “the intensity of those promotions to reach heightened levels.”
EXPR stock investors aren’t the only ones that got nervous about a less-than-jolly holiday season. Best Buy (BBY) was one of the first names that got pounded for its plans to have heightened promotions during Black Friday and beyond. In mid-November, BBY stock plunged after the company vowed to sacrifice margins in order to “win” Black Friday 2013.
On top of that, early signs of weakness for holiday shopping sent JCPenney (JCP), Macy’s (M), Urban Outfitters (URBN) and others falling in Monday’s trading.
Heavy discounting resulted in the first decline in Thanksgiving weekend spending (which includes, of course, Black Friday) since 2006. The drop came even in the face of heavier foot traffic for Black Friday 2013. It also seemed to confirm the prediction that this will be the toughest holiday season since 2008 … and not even strong retailers like EXPR will be immune.
Of course, folks who believe in Express long-term might just see today’s sell-off as a sweet discount. EXPR stock is now trading for just over 13 times 2013 estimates and under 11 times 2014 estimates. That’s a Black Friday-style markdown considering earnings growth of over 14% is on tap per year for the next half-decade.
Still, if you decide to buy EXPR stock on the dip, be prepared for some rockiness in the coming months. Lower Black Friday spending likely won’t be the only sign that this holiday seasons will be sub-par — and more EXPR stock investors may decide to preserve what profits they have left.
As of this writing, Alyssa Oursler did not hold a position in any of the aforementioned securities.
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