A Direct Link Between the Returns of Retailers and the Type of Stores They Operate
So far the year 2020 has been one of extremes for retailers. Some companies are doing great and we have seen a great number of bankruptcies as well. Since the COVID-19 pandemic started we have seen some stores do well and others have floundered.
One item that has been a major factor seems to be whether the company has a strong online presence or not. But I found a direct link between the gains in the stocks and what type of stores the company operates.
Looking at the Tickeron Screener and the scorecard for nine different retailers, we see the one-year returns for the stocks have varied greatly. All nine of these companies will report earnings during the week of August 17 through 21 and that’s the reason I have grouped them together. We see home improvement retailers Lowes (LOW) and Home Depot (HD) are in the top spot and the third place spot with gains of 69.7% and 43.3%, respectively. Target (TGT) is in the number two spot with a gain of 68.8%.
At the bottom of the list we see Kohl’s (KSS) with a decline of 47.1%. The second worst performance has been from Nordstrom (JWN) with a drop of 33.7% and Foot Locker (FL) is down 19.3%.
If we look at the stores at the top of the list, sure two of them are home improvement retailers, but the top four all operate as stand-alone stores. They aren’t in strip malls or traditional malls—they have standalone buildings. Now look at the bottom five. Foot Locker and Nordstrom stores are typically found in traditional malls. Kohl’s, Ross Stores (ROST), and TJX Companies (TJX) all typically have their stores in strip malls or in smaller shopping centers where they are considered an anchor store.
I thought this was a fascinating development and I think it is more than just a coincidence. Yes, the stocks at the top of the list also seem to have pretty strong online operations, but so does Kohl’s. What I really think is going on with the stocks is that they reflect the trend that has been going on for a number of years where the big, enclosed, traditional shopping malls are struggling. We have seen Neiman Marcus, Lord & Taylor, JC Penney, and Brooks Brothers declare bankruptcy. Just this week Stein Mart became the latest retailer to file for bankruptcy.
Many of the companies that have declared bankruptcy in the retail space serve as anchor stores for traditional malls or for strip malls. Many of these stores were struggling before the pandemic. The economic shutdowns that have taken place didn’t cause their troubles, but the shutdowns did accelerate their demise.
Unfortunately there is likely to be a snowball effect as the anchor stores leave, the smaller retailers will struggle as well and it will likely lead to more bankruptcies.
Getting back to the upcoming earnings reports and the image from the Tickeron Screener, the group as a whole has a short-term positive outlook. There are three “strong buy” ratings, five “buy” ratings, and only one “sell” rating (Foot Locker). The overall fundamental ratings aren’t nearly as bad as I would have expected. All nine stocks have more bullish indicators than bearish indicators and that was shocking to me.
The two biggest areas of concern are in the Valuation Rating and the Profit vs. Risk Ratings. Each of those categories shows three stocks with bearish signals in that column.
The technical picture is even stronger than the fundamental picture. There are only six bearish signals across the whole board and three of those are for Foot Locker—thus the “sell” rating on the scorecard.
The AROON Indicators and the MACD Indicators are both showing a number of bullish signals for the group.
Continuing with the standalone concept versus the mall and shopping center stores, the EPS estimates for the coming reports seem to follow my line of thinking. We see Lowes and Home Depot are expected to see earnings growth while Target and Wal Mart are expected to see small declines in earnings, but remain profitable.
Four of the five mall and shopping center oriented companies are expected to lose money in the quarter and all five reported profits in the same period last year. Foot Locker is the exception again as it is expected to earn $0.25, but that is considerably lower than the $0.66 the company earned last year.
LOW's MACD Histogram crosses above signal line
The Moving Average Convergence Divergence (MACD) for LOW turned positive on October 08, 2024. Looking at past instances where LOW's MACD turned positive, the stock continued to rise in of 48 cases over the following month. The odds of a continued upward trend are .
Technical Analysis (Indicators)
Bullish Trend Analysis
The Momentum Indicator moved above the 0 level on September 12, 2024. You may want to consider a long position or call options on LOW as a result. In of 86 past instances where the momentum indicator moved above 0, the stock continued to climb. The odds of a continued upward trend are .
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where LOW advanced for three days, in of 351 cases, the price rose further within the following month. The odds of a continued upward trend are .
The Aroon Indicator entered an Uptrend today. In of 331 cases where LOW Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are .
Bearish Trend Analysis
The RSI Oscillator demonstrated that the stock has entered the overbought zone. This may point to a price pull-back soon.
The Stochastic Oscillator entered the overbought zone. Expect a price pull-back in the foreseeable future.
Following a 3-day decline, the stock is projected to fall further. Considering past instances where LOW declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
LOW broke above its upper Bollinger Band on September 13, 2024. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.
Fundamental Analysis (Ratings)
Tickeron has a positive outlook on this ticker and predicts a further increase by more than 4.00% within the next month with a likelihood of 79%.
The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating very strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is seriously undervalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (0.000) is normal, around the industry mean (12.064). P/E Ratio (18.885) is within average values for comparable stocks, (36.044). Projected Growth (PEG Ratio) (3.244) is also within normal values, averaging (2.650). Dividend Yield (0.018) settles around the average of (0.034) among similar stocks. P/S Ratio (1.685) is also within normal values, averaging (18.679).
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating low risk on high returns. The average Profit vs. Risk Rating rating for the industry is 74, placing this stock better than average.
The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating outstanding price growth. LOW’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron Seasonality Score of (best 1 - 100 worst) indicates that the company is fair valued in the industry. The Tickeron Seasonality score describes the variance of predictable price changes around the same period every calendar year. These changes can be tied to a specific month, quarter, holiday or vacation period, as well as a meteorological or growing season.
The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to consistent earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
Notable companies
Industry description
Market Cap
High and low price notable news
Volume
Fundamental Analysis Ratings
The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows
General Information
a company, which engages in the retail sale of home improvement products
Industry SpecialtyStores