Off-price or online. Those are the two watchwords of what works in retail, and the companies with those kinds of businesses have stocks that are saying, no screaming, that you have to be one or the other to thrive in this world.
Take Thursday. Burlington (BURL) reported, and it put up 3.9% same store sales when Wall Street was looking for 2.9%. That's a major beat, one that merits a fine rally. When you couple that with margin expansion and a promise for even more margin expansion down the road, then you can make a judgment that this off-price franchise's stock can really run.
But then consider Kohl's (KSS) , a more traditional brick-and-mortar retailer with an online strategy that is not as good as a Target (TGT) or a Walmart (WMT) . It reported an in-line quarter and it gave you a boost in dividend. Its stock rallied ever so briefly and then pirouetted and has been falling ever since. It's stock now yields 8%, signaling that its dividend is in danger. How is that possible after you get a 5% raise in it?
Because Kohl's is neither online nor off-price.
You can say the same thing about Macy's (M) . Here's a company that has shed assets, closed unprofitable stores, paid down debt and is developing its off-price business, called Backstage, while cashing in on the cosmetics boom with Blue Mercury.
Nothing but losses for those who own the stock. It yields an astounding 12.5%, which is saying that Jeff Gennette has to cut the dividend. Would he do that to preserve cash even as the company is profitable? Maybe.
What matters again, though is that the company is a full-priced business in an online or off-price world. Not only that, but it is mall-based around the country and tourist based in New York. Holy cow -- that's enough to scare any portfolio manager away given the prevalence of Covid-19.
Now consider Walmart. It's got an extraordinary off-price and online strategy that seems to be working. It's stock barely got hit in what was a horrendous opening. It fulfills everything that a stock picker would want right now. It's a double play.
There are hybrids. I like CVS (CVS) -- not because of its drug store, but because of its Aetna, division especially with a socialist looking less and less likely to be the head of the Democratic ticket. But to be sure I don't like Walgreen's (WBA) which lacks that diversity.
Kroger (KR) is another. Good numbers Thursday. It's as off-price and online as an old-line grocery store can be.
And finally there's the ultimate hybrid: The dollar stores. Dollar General (DG) has been one of the best performers of the era. It's so well-run and keeps expanding where there's little competition. It's off price for certain. I like the model; I like the company.
But then there's Dollar Tree (DLTR) . We had them on "Mad Money" Wednesday. It used to be the king of the dollar stores, until it bought the under-managed Family Dollar rival five years ago. Since then it's been rocky as all get out, with a gain of a only $2 since that deal closed -- the worth of two pairs of Dollar Tree sunglasses. During that same period, its competitor, Dollar General went from $76 to $159.
Is it time to buy Dollar Tree and swap out of Dollar General? It's strictly a show-me story as even its CEO, Gary Philbin has said. I am not sure. The tariffs and supply chain issues coming from its China dependence coupled with the coronavirus could keep it back.
To me, though, it's certainly the right concept. They get it right, it could be huge. But I say prove it and there will be enough upside that it will be worth the wait.
Online, off-price, or nothing. That's the determinant in the time of the coronavirus as the trajectory of all of these stocks show.