In the words of Rodney Dangerfield in "Caddyshack", let's dance! Macro surprising to the upside, awesome. Fed has our backs, super awesome. Twitter ripping to new highs despite no profits, totally cool.
Bottom line: the market will blow up in the faces of many in 2014, but in the meanwhile stay engaged and keep making money. Hey, if the pigs are eating at the trough like, well, pigs why not join in the fun.
As I was on TV and then walking the malls to gauge the lay of the land on #TBT, some sales numbers hit the wires that caused retail stocks to pop. Is this the turning point in sentiment? Are we about to get a rally in best-in-show names and pure dogs into the teeth of subpar bottom lines shared in early January? Tread lightly, tiger. Here are a few things to watch:
- Trust me when I tell you this: there is a wave of negative notes from assorted corners poised to touch upon market share loss among teen apparel retailers American Eagle (AEO), Aeropostale (ARO), and Abercrombie (ANF). Watch how the stocks react to them for clues on whether retailers are oversold.
- If there is volume related earnings upside for retailers driven by post-holiday discount intrigue, then J.C. Penney (JCP) shares will start putting together sessions in the green. Note the company will be one of the retailers to disclose sales in early January.
- If you didn't know this already, V.F. Corp. (VFC) is a holiday season winner. Receiving reports on out of stocks and prices, once again, that held across a majority of styles found at department stores.
In Search of Growth
I have been talking to many execs in the attempt to read their views on investment in new "stuff." My sense is that many exec teams are still reluctant to take risks for fear of earnings letdowns, but there is more openness compared to 2013. One example of what I am seeking (and I am doing this because stocks are trading at lofty valuations so for any opportunities I want to see if their growth areas not priced into the stock) is on display below with Starbucks (SBUX) This is an exchange I had with the company, which my firm Belus Capital Advisors rates the stock a buy (for now), on Christmas Day:
"Getting some real great interest in the interesting local items on the Starbucks international menu mentioned here:
My question: is there anything preventing Starbucks from bringing some international items to the U.S. for a limited time basis going forward? Or even creating a new international-themed menu?"
"Yes, we certainly have some fun, locally-relevant offerings around the world!
Our product innovation team here in the U.S. explores all kinds of menu options on an ongoing basis. There are a number of factors that go into menu selection, as you can imagine. But there's nothing specifically that would prevent us from offering some of these international favorites -- as long as it made sense for us."
I think I took them by surprise. I would love to see one menu board dedicated to a "Taste of International" product suite, consisting of top items from around the world at a premium price. To me, this would be a nice touch for: (1) the international consumer that travels to the U.S. and makes Starbucks the first place they visit, and in reality help globalize the brand; and (2) the U.S. consumer that doesn't travel or have any idea what Starbucks sells overseas. This lack of knowledge will be met with intrigue for the new, higher priced menu options.
As of right now, I don't anticipate any broad rollout of products of local relevance to international markets in the United States. There possibly could be tests in secret, high volume Starbucks locations, but nothing that will materially alter domestic comps over the next six to 12 months.