They are now getting to even the best of the mall: L Brands (LB). This is a phenomenal company, a creation of Leslie Wexner, that has emphasized non-Amazon-able hard goods and specialty products and seemed immune from mall weakness.
Not anymore. This morning, it reported April store sales of plus 1%. More important, the company told you that Victoria's Secret, the crown jewel of the chain, had minus 1% comp sales. That's just shocking, frankly. I don't even know what to say, other than if L Brands is seeing this kind of weakness, to me it signals a dramatic drop off in traffic to the mall, maybe the entire mall.
I have no idea how you can own a stock like Macy's (M) or Sears (SHLD), or Nordstrom (JWN) or even J.C. Penney (JCP), which is coming back after some real time in the wilderness. I think you have to forget bottom fishing in Gap Stores (GPS). American Eagle (AEO), Express (EXPR), Abercrombie & Fitch (ANF), totally problematic.
Yep, L Brands is a huge step function down and tells you that the decline is now so far-reaching that if a company has a preponderance of mall-based stores -- not strips, which still seem to be hanging in, but actual malls -- it's probably having a miserable month.
I know there is a propensity to want to short Simon Properties (SPG) off this or Federal Realty (FRT). But the people who run these companies are whip smart. Do not bet against them, as they are filling up their properties with services businesses or amenities that people really like, not to mention, in the case of shopping center king Federal Realty, apartments, too. A great location for a shopping center can be a great location for housing.
I am worried about this group. We put out a separate today for Action Alerts PLUS that talks about what's happening that's positive at Costco (COST). I still think that the home improvement category works, as do the strip mall stores like Dollar General (DG), Dollar Tree (DLTR) and TJX (TJX).
But otherwise, you just can't be there. Way too dangerous.