I don't think retail could be more all over the map than it was this quarter. So many shibboleths smashed. Such a reordering.
Let's go over the big trends as we see them and how the market's reacting to them.
First, we have what's being perceived as a trade-up going on as the tax cuts that all Republicans want will no doubt put more disposable income on the table.
That, and not the actual numbers, I believe is why the stocks of Macy's M, Kohl's (KSS) and Nordstrom (JWN) have not come down after they reported a reaffirmation or better-than-expected earnings. (Kohl's is part of TheStreet's Dividend Stock Advisor portfolio.)
Each case is a little different. Kohl's is buying back a gigantic amount of stock, a reminder of its consistent cash flow. Macy's is monetizing real estate and getting out of laggard stores. Nordstrom had the right merchandise and things weren't all that promotional.
But the bottom line was that investors like what they said, as they did for J.C. Penney (JCP) , which reported mediocre numbers and slashed the forecast. That's rather an amazing combination of hatchet to the forecast and stock rally. It shows, again, the optimism in the stock market, especially because Penney told a more positive tale on the conference call than the numbers would imply.
Next, Home Depot (HD) trounced Lowe's (LOW) . The disparity between the two has never been higher in my eyes, and I was aghast at how much stronger Home Depot is performing in pretty much every aisle, but especially big-ticket appliances. There's without a doubt some execution issues at Lowe's, but I believe Home Depot has a much better bead on what the customer wants right now and is doing a remarkable job of putting its game plan to work. The big-ticket sales, especially to the professionals, were extraordinary, and I think some of that is the tie-up with Salesforce.com (CRM) to know what the customer is looking for. Truly amazing disparity.
On the call, Home Depot talked about share donors, which certainly included Lowe's, but do not forget there are still $25 billion in sales at Sears Holdings (SHLD) -- sure, half of what they were eight years ago, but still lots of jump-ball business that Home Depot is winning over.
To me it seemed like household formation and home-price appreciation numbers favored the big-box do-it-yourselfers but, in retrospect, it looks like it only favored the Depot.
It's hard to pin down the trade-up story, but maybe we should look at Target (TGT) vs. Walmart (WMT) for answers. Target just crushed it, putting up some extraordinary numbers and indicating a really robust back-to-school and upcoming holiday season. Almost every aisle was strong and the proprietary brands sold particularly well, especially in toys.
Walmart? Hard to get a read, but it is so focused on future spend that I have to wonder if it isn't too focused because the same-store sales were nothing to write home about. I hope Jet.com doesn't take their eye off the ball. Not a bad quarter, but if you wanted to map the consumer between Target and Walmart, there is no doubt Target was the winner. (TJX is part of TheStreet's Action Alerts PLUS portfolio.)
I am always trying to figure out if the consumer is trading down or up. Next week we get earnings from Dollar Tree (DLTR) , and what I am going to do is stack those numbers against Walmart's and, more important, those of TJX (TJX) and Ross Stores (ROST) , where I think the growth was tremendous. Ross in particular was a standout, trouncing same store estimates; I was looking for 3% and they delivered 7%.
Initially, the stock of TJX got banged on its forecast that the holiday season would be difficult. I think people didn't realize how conservative they were being until post call. The next two days made up for where the stock should have gone, given how I could argue that TJX was among the most robust performers, especially, once again, its standout HomeGoods division.
Ross? What can I say? It verified my thesis that it would have a lot of full-priced merchandise for much less because of the disarray among the broadline retailers, especially Macy's, which is closing 100 stores. Sure, the broadliners did better, but it's always compelling to listen to the Q&A on a TJX or a Ross because both companies emphasized that there is plenty of merchandise out there at other stores that they are able to buy at much lower than wholesale price and then mark the goods up just enough to have terrific, impressive sales.
TJX and Ross might be remembered s among the stars of the moment.
Sporting goods is mixed. Just as we expected, Foot Locker's (FL) benefiting from the war among the sneaker makers, although it put the kybosh on Under Armour (UA) when it talked about slowing Steph Curry sales. The stock sold off initially, like so many of the good ones on profit-taking, but then buyers came in, as is also want to happen, and it regained its form. Dick's (DKS) gave you very good numbers, but it has galloped so high after the failing of Sports Authority that there was just little room to run. (Foot Locker is part of TheStreet's Trifecta Stocks portfolio.)
How about the mall? A truly disparate place, with only one star and a ton of losers.
The biggest losers, as usual, are Gap Stores (GPS) and Abercrombie (ANF) . If I worked at either of these two places, it would be a moment of existential crisis. Gap is again in turnaround mode, something that seems to be a bit of a permanent state. Abercrombie is again in serious decline. How else can you feel about a chain that had minus-6% same-store sales when people were looking for minus-4%, but more important, 2 cents' worth of earnings per share when people were looking for 20 cents. The only good news was the candor: CEO Arthur Martinez termed the numbers disappointing.
Sadly, in a nasty, short and brutish world, there is no need for either chain. They are right out of Sartre or Camus. In fact, that's what I should call them, Sartre Stores and Camus & Fitch. So fitting.
Speaking of crisis of confidence, Williams-Sonoma (WSM) had a surprising 4.5% decline in Pottery Barn. Why? Why not listen to CEO Laura Alber about why: "For others less familiar with Pottery Barn, we are perceived as expensive, too predictable and not for them." Talk about existential. Fortunately, the red-hot West Elm bailed them out again and the stock, down almost 10% for the year, was barely nicked.
You know where there could be a turn coming? L Brands (LB) . There was never a downturn in Bath & Body Works -- very hard to Amazon that place. Pink's been extraordinarily good throughout. Victoria's Secret has been the problem, and I think they are addressing it by ending the everyday race-to-the-bottom, low-price promotional aspect. Or to put it more graphically, they are getting rid of the free panty promotion as well as the $10-off-a-bra deal. Thank heavens!
Don't give up entirely on the mall, though. We have a new winner: Children's Place (PLCE) . Up 10 points yesterday on an amazing quarter, up almost two today, Children's Place, led by the amazing Jane Elfers, has cracked the code and is winning off and online. It's pure execution: the right styles, the right sizes. The Children's Place is the Nvidia of retail and a reminder that not only is the mall not dead, but you can make a ton of money in it if you have the right stuff.
One thing that's certain about retail: We have too many retailers. We have some hanging on by threads. We have some that are simply not needed. We have some that are atavistic and antediluvian and are just waiting to be destroyed by Amazon (AMZN) . And then we have others that could be saved by the, well, Trump. Now you know which is which and which can be bought on dips and which should just be put out of their misery because they have little reason for being. (Under Armour and Amazon are part of TheStreet's Growth Seeker portfolio.)