Did the retail rally run out of gas? We've not seen all that much follow-through this week from that blockbuster announcement from Nordstrom (JWN) saying it might want to go private.
Let's see. In the department store world, Sears (SHLD) is still issuing releases about how well things are going. How hard it must be to stay relentlessly upbeat when the world is closing in around you. J.C. Penney's (JCP) floating around, trying to ready itself for its share take, if Sears were to ever stop shifting the Titanic deck chairs and stay focused on the matter at hand.
The stock of Macy's (M) had a "Nordstrom" bump, but has since gone back into sleep mode. Only the stock of Kohl's (KSS) is higher, and that might be about as far as it can get -- a nice 10% move on no real news other than the safety of its 6% yield that now finds itself at five and change because of a quick move higher.
Yesterday, June 13, we did see a positive stock reaction to negative retail news: a rally in both Home Depot (HD) and Lowe's (LOW) , even as leading plant and gardening supplier, Scott's Miracle Gro, said it wasn't all that happy with sales in the mass channel so far.
It was almost as if people were betting against the two chains off of concerns about Scott's presentation, then got the bad news, and then all came in to cover at once. I went through it a second time last night, and I thought it read even worse for the two big box chains. But that's not how the market greeted the story.
We bought some stock of The TJX Companies, Inc. (TJX) for Action Alerts PLUS the other day, because of the excess inventories in the department supply chain and the knowledge that the best place for all the closing clothing stores to raise cash, whether they be Macy's, Penney, or the newly bankrupt, Gymboree, will be TJX.
I was pleased to see that some buyers finally came in to The Children's Place (PLCE) now that its number one competitor might be closing more than 400 stores. Both stocks are highly valued, though, and therefore aren't getting the love they would, given that the group's price to earnings multiple has shrunk so much since the year began.
It's a little bit as if, four days later, the Nordstrom news never happened, or that it's been overwhelmed by the incredibly bad numbers we are getting from the formerly public Neiman's and J Crew.
I wish I could be more sanguine about retail, given that I think that traffic hit its nadir in February. The pep in the stocks of the apparel companies, notably Canada Goose (GOOS) , V.F. Corp (VFC) , PVH Corp. (PVH) and Under Armour (UA) , (UAA) , sure makes you want to be.
But with the exception of Walmart (WMT) , Costco (COST) and Amazon (AMZN) and a possible comeback of Home Depot, Lowe's and perhaps Best Buy (BBY) , I think the trade may have come and gone. Sure, there are specialty situations that are working: Ollie's Bargain Outlet Holdings (OLLI) and Five Below (FIVE) stand out. Nevertheless, even the dollar stores have no real momentum.
It remains a totally unloved group and it does feel as if Nordstrom never happened.
But the fact is that the Nordstrom brothers want a transaction, and I think they get one and at higher prices than where the stock is now. They have given the market plenty of time to make a decision now that they have broadcasted their intention and, to me, it looks like they can now get the deal done at a very good value if you think non-discount bricks and mortar has any hope at all in the future.
You know, though, what I think is really happening here? I think we are all trying to get our heads around the idea that there may, like the auto companies, be only three large retailers that make it through this morass with any dignity or price appreciation: Walmart, Amazon and Costco. They make it because they each have something that all the rest don't have: ways where they can't kill each other.
Amazon's supreme. It plays with its own currency, like a country, with an army of millions. Walmart has the family behind it, allowing Doug McMillon to buy Jet and to raise workers' wages and clean up the stores so they are ideal pick-up and drop-off locations. Costco is a club with prices that still can't be beaten.
Everything else is now feeling like, as we say, a trade, and just a trade. You may think that's too negative, but the stocks tell you that we are now in a Big Three world, and everything else is becoming too dicey to own for more than just a few days of ill-fated rotation.