What to Expect From Retail Stocks This Holiday Season

It’s almost the “happiest time of year,” folks. With the holidays fast approaching, consumers are gearing up to spend a lot of money, and many retail stores are rolling out the discounts and promotions to capture their shares of the gift-giving season.

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However, as the temperature drops, retail sales have also been cooling. In September, retail sales pulled back 0.3%. For October’s report, economists were looking for a 0.6% rebound. Are there buying opportunities to be had this holiday season in the retail arena?

Some companies are in better shape going into the winter months than others. For example, Macy’s (M) posted 23% earnings growth, beating analysts’ estimates for the third quarter. With solid fundamentals and strong buying pressure, Macy’s earns a “B” in my Portfolio Grader screening tool.

At the same time, this is shaping up to be a lean winter for big box retailer Walmart (WMT). Walmart’s barely scrapes by as a “C-rated hold” in Portfolio Grader. Walmart released its earnings report earlier today, and while Walmart did post better-than-expected profit, its third-quarter earnings were lower year over year. Walmart is also being very cautious with its guidance going forward. So, this slight earnings surprise is not enough for me to seriously consider WMT stock. Walmart’s track record this year has been less than stellar, and there’s a whole laundry list of metrics Walmart needs change before becoming a solid “buy” in my book.

And Walmart isn’t alone when it comes to needing improvement.

In the third quarter, JCPenney (JCP) reported a net loss of 62 cents per share. While JCPenney beat analysts’ estimates for a loss of 88 cents per share, it still wasn’t an impressive number. Revenues also decreased to $2.76 billion for the quarter, compared with $2.78 billion last year. This missed the consensus estimate of $2.81 billion in revenue. So, it’s not surprising that JCPenney is also rated as “C-rated hold” in Portfolio Grader. JCPenney is slowly improving in key fundamental metrics, but like Walmart, the incremental increases aren’t enough to boost JCP stock to a buy.

Kohl’s (KSS) also released its third-quarter earnings report, which didn’t inspire much confidence either. Kohl’s reported earnings of 70 cents per share, falling short of analysts’ estimates of 74 cents per share. Net income took a hit in the third quarter, falling by 20%. KSS stock is a “C-rated hold” in Portfolio Grader.

Overall, retail sales haven’t been looking too hot. Regardless of how the retail sales data pans out, I advise caution before diving into any retailer. As you can see above, not all retailers are keeping up. So, it pays to run any potential new buys through Portfolio Grader.

Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip GrowthEmerging GrowthUltimate GrowthFamily Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.


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