Is there anything that's not hit or miss in retail? It's all case by case and moment by moment. I can't blame anyone from wanting to stay away from all of these stocks. They have, in many ways, gotten too hard to fathom. Just think of the amazingly inconsistent performances we have in the sector.
Start with Wal-Mart (WMT). I mean, really, what the heck is going on there? How many months can it be subpar before asking if the chain has lost its way? Target (TGT)? That used to be the standout; now it is the benchmark for poor execution. The stores look and feel old and dated.
We've got the most reliable of the reliables faltering. TJX (TJX) misses for the first time in ages. That was extraordinary, as CEO Carol Myrowitz is money. We bought Costco (COST) for the charitable trust on the weakness engendered by that last quarter. It was, however, anything but a blow-away quarter. Can there be a more consistent retailer than Macy's (M)? Nevertheless, it did miss, and even though the stock has come all the way back and then some, you have to regard the quarter as worrisome.
On the other hand, though, you could have set your clock to how poorly J. C. Penney (JCP) was doing, and now we are seeing some nice return to positive comps. Kohl's (KSS) might be turning, but then it turns out to be a tease. Nordstrom had been weak. Now it's strong. Dillards (DDS), long considered pathetic, is now a total standout. Dillard's for heaven's sake.
How can there be such variations between Home Depot (HD) and Lowe's (LOW) literally on a quarter-to-quarter basis? They look so alike and have been neck and neck. Now Lowe's seems to have fallen and fallen hard.
All aspects of retail mystify. With sports apparel selling so well, as Under Armour (UA) tells us, how can Dick's (DKS) blow it so badly? Is Best Buy (BBY) doing well? Or is it doing poorly? What's the real story with GameStop (GME) who knows?
It's even worse in apparel. Coach (COH) is disastrous. Suddenly Kate Spade (KATE) is doing well. Michael Kors (KORS) has been a horse. But is it still one, and does it have lingering inventory issues as Herb Greenberg has implied? What happened to Tumi (TUMI)? I like Nike (NKE), own it for the trust. Still it's Skechers that steals the show. Yet two years ago, the FTC came down with hobnailed boots on health claims. What a recovery! Deckers (DECK), on the other hand, seems like it is recovering and then it seems like it isn't. Just drives you crazy.
Restaurants may be the toughest of all. We saw Chipotle (CMG) have terrific top-line numbers lately, but with escalating food costs, can the bottom-line numbers regain luster? Guacapocalyptic pricing for certain. Panera (PNRA) was so predictable. Now it is predictable but in the wrong direction. Have prices gotten too high for both Panera and Chipotle? I whipped out a $10 bill the other day at Panera, and I was $3 shy.
Is that why DineEquity's (DIN) Applebee's and Ihop are surprisingly strong? Maybe they seem like bargains vs. fast casual, especially when you have wait service thrown in.
Starbucks (SBUX), I know, is doing well, but people keep talking about coffee prices going up -- something that shouldn't perturb you if it doesn't perturb Starbucks, but people always have one foot out of the door of that fabulous stock. Same with Dunkin (DNKN). But can you blame anyone when last year's hot doughnut play, Krispy Kreme (KKD), has gone surprisingly cold?
That's why I have to urge you to have conviction that a Skechers or a Starbucks or an Under Armour is a multiyear story not a multiday story. Frankly, any other way to look at it is a recipe to buy high and sell low, the essence of bad investing, if that can be called investing at all.