The retail rout continued on Thursday as some small specialty names and even larger department store chains suffered to varying degrees in the midst of what is expected to be a huge holiday shopping season. The market is exhibiting little patience with retail these days and remains skeptical of the sector.
Casual apparel retailer Tilly's Inc. (TLYS) suffered the greatest damage as it fell 21% on Thursday after reporting third-quarter results. While earnings of 24 cents a share were a penny better than the consensus, revenue of $146.8 million missed by $2.2 million. Same-store sales were up 4.3%, which was within the company's guidance of 3% to 6%. However, guidance for the ever-important fourth quarter put earnings per share in the 26-cent range, below the previous consensus. The company ended the quarter with $4.25 per share in cash and short-term investments and no debt.
Build-A-Bear Workshop Inc. (BBW) was off 9% and has fallen 24% since early November. Thursday's damage came as revenue fell nearly 10% versus the same quarter last year and the company lost 42 cents per share. Sales in Europe fell more than 23%.
Some larger names were down as well. Kohl's Corp. (KSS) slipped 3% and is down 22% over the last three weeks. Third-quarter earnings, released on Nov. 20, were a bit better than expected, but the stock was slammed that day, down 9%. KSS trades at about 11.5x next year's consensus estimates and yields 3.6%. Kohl's increased the dividend 11% last March and it would not be surprising to see the company raise it again in 2019. (Kohl's is a holding of Jim Cramer's Action Alerts PLUS charitable trust.)
Dick's Sporting Goods Inc. (DKS) lost 5% after releasing third-quarter EPS that were far better than expected -- 39 cents versus the 26-cent consensus -- but falling short of the $1.86 billion revenue consensus by $20 million, which was a miss of just over 1%.
Nordstrom Inc. (JWN) was down 4% on no news and is down 22% over the last three weeks or so, which is similar to what Kohl's and Dick's experienced.
Back in Smallville, Hibbett Sports Inc. (HIBB) was slammed on Thursday, down nearly 11%. Hibbett reported third-quarter results on Tuesday and missed the consensus on earnings (14 cents versus 16 cents) and barely missed on revenue ($216.9 million versus $217.4 million). Shares held up well that day and were actually up about 6% at one point before finishing the day flat. It is unclear whether Thursday was a delayed reaction or a sympathy move with Dick's, but Hibbett's volume was about 3x normal average volume.
Hibbett ended the quarter with $121.1 million, or about $6.50 per share, in cash and $25 million in debt, which was used in the City Gear acquisition. The company repurchased another 395,000 shares during the quarter and still had $188 million on its repurchase authorization at the end of the quarter. Hibbett now expects full-year earnings per share in the range of $1.55 to $1.65, which is down from its previous guidance for EPS in the range of $1.57 to $1.75. We'll need to wait and see if and when City Gear will be accretive to earnings.
Despite what is expected to be a banner fourth-quarter holiday retail season, the market still has a bee in its bonnet about the sector; anything less than perfection will not be tolerated. Also, retail is a sector that is still experiencing big changes due to online sales and intensified competition. Some will not, and should not, survive. In this environment, just as in the summer of 2017, there ultimately may be some short-term opportunities to exploit market inefficiencies, but buyer, beware.