Major retailers are taking a nose-dive after reporting disappointing holiday sales (November through December) earlier this week. Now with the weak sales data reported, Macy’s said it would be closing 100 stores (cutting about 10,000 jobs) while Kohl’s slashed its 4Q profit targets as sales were 2.1% lower than last year’s holiday season.
Just yesterday we saw the immediate impact of these weak sales as some of the biggest department store retailers plunged as much as 19% in one day. These stocks, including Macy’s, Kohl’s, Nordstrom, and Dillard’s, are down around 30% from their recent 2016 highs.
With so much market exuberance after the election, the majority of Wall Street analysts forecasted a positive outlook on retail and thus the economy and the stock market. However, with the retail sector’s sudden demise, could it be the tip of the iceberg for this market in 2017?
We have been warning our clients since mid-November 2016 to expect weak retail sales. Once again, our Smarte Trader subscribers were ahead of the curve and were able to prepare before the big plunge in the major retail stocks.
Smarte Trader Excerpts:
11-16-16: Retail stocks were strong, [which] would be a good sector ahead of Thanksgiving. But we would aim to get out just ahead of that.
11-23-16: We believe that there will be some disappointments, such as brick and mortar retail sales, reported on Monday (November 28). We would do some trimming of exposure, if you have it, to the retail sector.
11-28-16: Retail stocks were under pressure. We caution our clients not to believe the widely divergent retails sales numbers. Some give double-digit gains while others say they were flat for brick and mortar. Obviously, online sales are very good. But that is not enough to offset the trouble in the stores.
12-21-16: What is more important are the poor results (sales), indicating that retail is weaker than revealed, no matter what many of the phony and conflicting statistics say. That suggests a weakening economy, no matter what the enthusiasm of the election results have done to the stock market.
12-22-16: The retail sector saw significant erosion in a number of key stocks in that sector. It appears that holiday sales are a big disappointment. Thus, the traders who want to get some exposure to the short side of the market could look at this sector.
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