Choppy. Slight slowdown. And with those three words and a small guidedown from VF Corp. (VFC), there goes retail. (VF Corp. is part of TheStreet's Trifecta Stocks portfolio.)
This market overreacts to any input, particularly a negative one. So when VF Corp., the fabulous worldwide apparel company, talked this morning about a "pretty much across-the-board slowdown" that will take growth from a projected 10% revenue growth to 8% even as it reaffirmed its earnings forecast, investors in retail stocks decided to bail from every one of the retailers, especially the department stores. Did they check which stores were really being hurt? Macy's (M)? Kohl's (KSS)? Target (TGT)? Nordstrom (JWN)? Did they find out if VF Corp.'s issues extended to Foot Locker (FL) or PVH (PVH)? (Target is part of TheStreet's Action Alerts PLUS portfolio.)
Nope, they just presumed that every retailer's having a terrible fall and it was time to exit. Sell sell sell.
Those who didn't even want to do any work on which retailers in particular might be hurt just blew out or shorted the handy retail ETF, which added more pressure to the group.
It didn't matter, by the way, that VF's worldwide business is very strong, particularly in China. Nobody seemed to even be listening to that. What a waste of time that part of the call was! All that mattered was "choppy" and "soft," coupled with some inventory numbers that did seem high relative to what we are used to seeing from VF.
We have learned a couple of things in the last few months about this market. For example, when one hospital chain has a problem, sell all hospital chains. When one cybersecurity company has a problem, as Fortinet (FTNT) did today with some weaker billings, they all go down, again aided by a convenient ETF that allows for instant shorting of the group. When one biotech company goes down, they all trade down. One health maintenance organization ... OK, you get the picture.
Some of the reason why we got such a domino effect here is that VF is the best of the best, the most consistent apparel company in the industry. We would love to hear from competitor PVH that all is well, but it isn't time for them to talk. They don't tell us until they report in the first week of December, a long time to wait for a stock that's down 30% for the year.
We do know, though, that Wal-Mart's (WMT) not doing well. That was last week's business. But that's nothing new.
We also know that Skechers (SKX) told us a tale of a slowdown in September, something that's not totally in sync with VF, which intimated that September was a little better than average. I will be speaking to the chief operating officer later tonight on Mad Money to get some answers. Plus, many are interpreting the comments from Under Armour (UA) yesterday about gross margin compression as meaning there's too much sportswear in the channel. You put together VF with Wal-Mart, Skechers and Under Armour -- rightly or wrongly -- and you get the reality that back-to-school season and October aren't so hot. So why stick around given what we have seen of late when one company in a cohort blows up? You have to figure that at least one of the big-time analysts who follows this group downgrades it and you need to get ahead of that negative commentary. (Fortinet and Under Armour are part of TheStreet's Growth Seeker portfolio.)
Once again, we see this "rolling bear" market of 2015 playing out, this time in retail. You wait a few weeks, as we have seen in industrials, in techs, in restaurants, in biotechs and even in FANG -- Facebook, Amazon, Netflix and Google -- then they come right back, But the key phrase is "wait a few weeks" because now retail's in the penalty box and it's a major, not a minor, infraction.