While U.S. equities overall continue to languish just below the 18,000 level on the Dow Jones Industrial Average, there’s been some excitement bubbling below the surface.
One of these areas is retailers, which have been hammered in recent days on a series of underwhelming earnings reports, as well as a series of economic data suggesting American consumers have snapped their collective wallets shut.
The latest personal income and spending report shows strong income growth, but weak spending. In fact, durable goods spending only rose 0.8% in March, much less than the 1.9% expected.
As a result, investors would do well to avoid these seven retail stocks as the center of the problem.
Retailers Hitting a Wall: Macy’s, Inc. (M)
Macy’s (M) shares are down 14% in trading on Wednesday after reporting a revenue decline of more than 7% from last year for the fifth consecutive quarterly sales decline. Forward guidance was cut as well.
Earnings came in at 40 cents (vs. 36 cents expected) while sales totaled $5.77 billion (vs. $5.95 billion expected). Same-store sales dropped 5.6%.
Management noted continued weakness in consumer spending levels that worsened in the middle of March — which was about a month into the epic 50% rebound in wholesale gasoline prices.
Retailers Hitting a Wall: Gap Inc (GPS)
On Tuesday, Gap (GPS) reported a surprise same-store sales decline in April of 7% vs. the 0.5% gain expected, and guided first-quarter earnings in a range of 31 cents to 32 cents per share vs. the 44 cents analysts were expecting.
Management added that they were considering store closures and that margins are under pressure because of bloated inventories.
Shares fell below the $19-a-share level on Wednesday for the first time since early 2012.
Retailers Hitting a Wall: Wal-Mart Stores, Inc. (WMT)
Walmart (WMT) shares are dropping out of a three-month topping pattern on Wednesday in sympathy with the broad sector weakness hitting retailers.
The company was recently initiated with an “underperform” rating by analysts at RBC Capital Markets on concerns over intensifying competition and an ongoing shift to e-commerce.
The company will next report results on May 19 before the bell. Analysts are looking for earnings of 89 cents per share on revenues of $113.17 billion.
Retailers Hitting a Wall: Target Corporation (TGT)
Target (TGT) shares are down 5% in trading on Wednesday to test its 200-day moving average for the first time since late February.
Not only is the stock being pressured by broad-sector concerns, but the company has been the focus of a politically driven boycott effort as well.
The company will next report results on May 18 before the bell. Analysts are looking for earnings of $1.20 per share on revenues of $16.3 billion.
Retailers Hitting a Wall: Kohl’s Corporation (KSS)
Kohl’s (KSS) shares are testing early 2013 levels on Wednesday amid the broad retail sector rout.
The company will next report results on May 12 before the bell. Analysts are looking for earnings of 37 cents per share on revenues of $4.13 billion. The options market is braced for volatility, with current implied volatility of 70% higher than historical volatility.
Investors will closely watch whether comments from Macy’s management that “we are not alone” in the sales downturn are true or not.
Retailers Hitting a Wall: Tiffany and Co. (TIF)
Tiffany (TIF) shares have dropped back to early March levels, trading down roughly 5.5% on Wednesday.
This despite a price target raise by RBC Capital Markets, as near-term pressures from weak local demand, the need to build business under the $500 price point, choppy recovery in tourism and investment spending hampered profitability.
The company will next report results on May 25 before the bell. Analysts are looking for earnings of 68 cents per share on revenues of $917 million.
Retailers Hitting a Wall: Nike Inc (NKE)
Nike (NKE) shares look ready to drop down and out of a three-month consolidation range near the $60-a-share level, putting the February lows back in play.
It didn’t help that analysts at Wells Fargo just downgraded the stock, while Under Armour Inc (UA) noted meaningful growth in footwear average selling prices — a sign that the industry is healthy or that UA is starting to push into Nike’s market share.
The company will next report results on June 23 after the close. Analysts are looking for earnings of 48 cents per share on revenues of $8.3 billion.