3 Sorry Retail Stocks to Sell in February While You Still Can


  • With inflation and economic woes hitting consumers, it’s time to dump these retail stocks.
  • Big Lots (BIG): The firm’s pivot to furniture didn’t pay off and its balance sheet is in trouble.
  • Qurate (QRTEA): The TV shopping network faces challenging demographic trends and suffered from an unfortunate fire at a key facility.
  • ContextLogic (WISH): The online shopping app is stuck in a downward spiral and is running out of time.
retail stocks to sell - 3 Sorry Retail Stocks to Sell in February While You Still Can

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The stock market is soaring. But the prosperity is not necessarily being distributed equally. For many consumers, between inflation, high housing prices, and a shifting job market, times are tough. This has led to this list of retail stocks to sell.

Numerous retailers are reporting that their customers are pulling back. And that’s still even with headline GDP numbers coming in quite strongly. If and when a recession does hit, retailers will face a most difficult operating environment. And it could be a mortal blow for these struggling retail stocks to sell that have already fallen on hard times today.

Big Lots (BIG)

Retail workers checking produce at a grocery store.
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Big Lots (NYSE:BIG) is a discount retailer focused on a so-called “Treasure Hunt” model where it offers shoppers unexpected items and goods at bargain prices. The company was quite successful with this approach, generating consistent profits for many years.

However, Big Lots lost its way. Amid rising competition from the likes of Five Below (NASDAQ:FIVE) and Ollie’s Bargain Outlet Holdings (NASDAQ:OLLI), Big Lots switched strategies. It began stocking its stores with far more furniture, thinking that these goods would attract new shoppers. However, this split up its customer base, as many people relied on Big Lots to buy food and other more frequently consumed items and weren’t looking to buy furniture at the same time.

The furniture strategy turned into an even bigger headache in 2023 when Big Lots’ largest home furnishings supplier abruptly went bust. This seems to have led to a cascading series of blows to the overall business.

Big Lots’ Q3 results were dismal, with revenues plunging 15% year-over-year. The company took a huge loss as it sold off real estate to raise much-needed cash. It is closing stores. And while it is otherwise managing costs and trying to get more efficient, it may be too little too late.

At the end of the third quarter, Big Lots had just $47 million of cash compared to $533 million of long-term debt. Some analysts have suggested that Big Lots is at meaningful risk of bankruptcy given its situation. After watching retailers such as Tuesday Morning and Bed, Bath & Beyond go bust, traders should be exceptionally cautious trying to play turnarounds on other struggling retailers like Big Lots.

Qurate Retail (QRTEA)

Commercial shopping center in a tropical climate
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Qurate Retail (NASDAQ:QRTEA) is a shopping platform that sells apparel, home furnishings, and other consumer goods via television and the internet. It is known for brands such as QVC and the Home Shopping Network.

The company was already struggling as consumers have shifted away from TV-based shopping to other alternatives. Combine this with the firm’s use of massive amounts of leverage on the balance sheet, and even a small decline in earnings can result in a terrible outcome for its common shareholders.

Making matters worse, Qurate suffered a fire at one of its major fulfillment centers during the 2021 holiday shopping season. This had a catastrophic impact on the company’s operating results and helped cause QRTEA shares to fall into penny stock territory. This makes it one of those retail stocks to sell.

To show how dire Qurate’s balance sheet is, consider the state of its preferred stock, Qurate Retail Inc 8.0% Fixed Rate Cumulative (NASDAQ:QRTEP). Unlike many preferred shares, QRTEP has a par value of $100 and traded around that price as recently as 2021. It is now at just $40, and QRTEP yields an incredible 19.9% today, assuming Qurate Retail can stay in business. That high yield, however, would indicate that the credit market has grave doubts about the company’s ability to stay in business for the long term.

ContextLogic (WISH)

An image of a laptop showing clothes on the screen with the mouse hovering over a 'buy' button; surrounded by credit card, piggy bank, shopping bag, coffee. Best E-Commerce Stocks
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ContextLogic (NASDAQ:WISH) is the parent company of the online shopping app Wish.

During the early days of the pandemic, Wish enjoyed a boom in popularity as people looked for new shopping options to replace closed-down physical store locations. In addition, advertising was available at low prices on digital platforms, offering Wish the opportunity to attract new users at a rapid clip.

However, as the advertising market healed in 2021, Wish had to throttle back its advertising budget. And, as it would turn out, there was very little customer loyalty once the marketing was turned off. ContextLogic’s revenues plunged from $2.5 billion in 2020 to just $571 million in 2022. The firm is expected to make $289 million in revenues for the full year 2023 and less than $200 million in 2024.

For a while, investors were hoping that ContextLogic would liquidate operations entirely, as it could return its remaining cash balance to shareholders. However, while the company is cutting costs, it doesn’t appear willing to shut down the business entirely. As such, it seems likely that ContextLogic will fritter away what’s left of its cash pile while the company’s money-burning retail business continues its downward trend.

On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.

Article printed from InvestorPlace Media, https://investorplace.com/2024/02/3-sorry-retail-stocks-to-sell-in-february-while-you-still-can/.

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