Do you know what is truly monumental about this retail move? It's the voracious way that the stocks keep moving up after they report amazing quarters.
And do you know why that keeps happening?
I think it is because the analysts themselves have never seen anything like it. They have never seen a group that simply beat the numbers by so much that they don't even know how to craft the superlatives necessary to describe them.
What happened? Why have no analysts just gone out and said "this whole group is the single best group in the market. You have to buy every one of them?"
I think one reason could be that they are afraid. They don't seem to want to embrace what's going on. It's simply beyond the ken of most of these analysts -- and they are a very good group, a long-standing brethren of hard working people -- to believe that things can be this good.
Plus there are still penalties to being wrong. If you decided that Dollar Tree (DLTR) had, at last, gotten its arms around Family Dollar -- even as your eyes show you that they are still pretty awful -- you might hurt people. There was a perception that Best Buy (BBY) couldn't possibly miss given how well it has been doing for so long. Did you want to be the one who recommended Macy's (M) at $40? How about if you believed that Gap Stores (GPS) was using all of that artificial intelligence and data mining to come up with the right formula and it was wrong anyway? Maybe you had the shoe on the wrong foot with Footlocker (FL) as it was hard to imagine that they could screw it up so badly? Was PVH (PVH) really just a victim of its own circumstances of being the first to do the big beats? Did you really hold back from recommending the group hard because of fears about JC Penney (JCP) and its $12 billion business, down from $17 billion six years ago?
Still, this LuluLemon (LULU) number -- done without a CEO no less -- and with this Signet (SIG) turn -- done with a straight out retail model and not a lending one -- make it clear that the penalties to missing the move have gotten pretty unforgiveable, especially given that the downside for all but the worst of the worst is typically like that of Dick's (DKS) , which is a dip and a bounce-back, or even better, Children's Place (PLCE) , which was held down by shorts initially but then came roaring back, something I said had to happen given the innate strength of the comp numbers and the joyous positive linear trajectory intra-quarter that had continued. It's amazing that the shorts were able to prevail in that one, initially but were ultimately overrun.
I am still trying to figure out the forensics of the LULU beat. I spend some time with them this spring and they were very bullish. But not so bullish that they could have seen what happened: a step-function up of a magnitude that I have never seen before in retail. These kinds of comparable performances are usually reserved for the likes of a ServiceNow (NOW) or a Salesforce.com (CRM) or an Adobe (ADBE) , not an apparel store.
So, put yourselves in the heads of some of these analysts. They don't know what to do. They can't possibly go out and predict double digit growth in stores. That's way too risky.
Instead they pretty much stick with their estimates. Same thing with Signet, where it was a terrific management turn, but also Walmart (WMT) and Costco (COST) and Nordstrom (JWN) and Kohl's (KSS) where I could argue that they macro helped immensely. That, and a recognition that Amazon (AMZN) threat didn't come to fruition, something you might have seen the positives brewing from when you listened to the real estate investment trusts of retail all of whom told you things have improved and the weaker hands are gone.
Final thought? There has always been a belief that a stock won't go up so much that you can't just say "they beat, they raised," and while I like it, I don't think that it is worth chasing. That's code for " I bet it comes down and you will get a chance to buy it."
But has that happened? Look at TJX (TJX) ? Did that really come in? Nordstrom? Costco? Ross Stores (ROST) ? Nope.
Oddly, from my scan, there is only one that has declined, Walmart.
And that, therefore, given how stellar it was, is the one to buy.
