If you thought the year-to-date carnage was bad in the markets -- which it is, with the S&P 500 down 20%, Russell 2000 down 22% and Russell Microcap down 23% -- or in specific sectors such as restaurants, you ain't seen nothing yet. Take a gander at apparel and specialty retail. It's beyond bad.
The number of names with year-date losses in excess of 40% is fairly large and may grow larger. Within apparel the damage includes brands that have been around awhile, such as American Eagle Outfitters (AEO) (down 53%), Abercrombie & Fitch (ANF) (down 52%), Burlington Stores (BURL) (down 49%), Children's Place (PLCE) (down 48.5%), Express (EXPR) (down 45.5%), Foot Locker (FL) (down 44%), Gap (GPS) (down 55%), Shoe Carnival (SCVL) (down 48.5%) and Victoria's Secret (VSCO) (down 50%). The "newcomers" such as Allbirds (BIRD) (down 70%) and Stitch Fix (SFIX) (down 73.5%) have it even worse, but these are busted initial public offerings (IPOs) that are not yet profitable.
Within specialty retail, there's Bed Bath & Beyond (BBBY) (down 67%), Conn's (CONN) (down 62%), Bath & Body Works (BBWI) (down 61%), Lands' End (LE) (down 43%) and Five Below (FIVE) (down 43%). Within both specialty and apparel, there are several more down between 30% and 40% year to date.
In years past, especially 2017's specialty retail Armageddon, the retail routs sometimes offered great opportunity for investors to pick up shares on the cheap. There were sudden, swift and wild moves within the sector at that time, but it was fairly evident that the market was overreacting. This was the time to back up the truck, and it worked well overall. The recovery happened quickly.
I'm not sure you can make the same assumption in the current market environment. This time it's different (it always seems to be). In 2017 we were not in (as I believe we are) or on the cusp of a recession. We were not facing the double whammy of inflation and supply constraints, or of a consumer who may be hunkering down in the face of all the uncertainty. Low price-to-earnings ratios and other solid fundamental data made shares legitimately cheap back in the 2017 retail rout, but I'm not sure the same applies here.
It's a good time to be careful. This time around there are reasons to believe that some specialty and apparel retailers may have further to fall.