Strong Consumption Is Breathing New Life Into Retail Stocks -- Update
24 Agosto 2018 - 12:30AM
Dow Jones News
By Ben Eisen
U.S. consumer sentiment is so strong that it is even boosting
shares of once-maligned retailers.
Target Corp.'s stock jumped 3.2% on Wednesday and gained another
0.9% on Thursday after the company reported its best quarterly
results in more than a decade. The gains marked the first two
record highs for the stock since 2015. The retailer's shares are up
33% this year, far surpassing the S&P 500's 6.9% rise.
"Like others, we're currently benefiting from a very strong
consumer environment, perhaps the strongest I've seen in my
career," said the company's chief executive, Brian Cornell, on an
earnings call Wednesday.
Other beneficiaries include Macy's Inc., whose shares have added
51% this year, Kohl's Corp., which has risen 49%, Nordstrom Inc.,
which has jumped 31%, and TJX Cos., which has gained 41%.
The SPDR S&P Retail exchange-traded fund has tacked on 16%
this year, including 5.6% in August alone.
"Wages are up. Employment is up. Interest rates are low. So it's
really a very good economic time for consumers," said Paul Hogan, a
portfolio manager and analyst at Fenimore Asset Management, which
counts Ross Stores Inc. among its holdings. The off-price
retailer's stock has risen 18% this year, though shares declined in
after-hours trade Thursday after the latest earnings report.
Not long ago, retail stocks were in free fall as investors
worried that traditional retailers couldn't compete in the new
world of e-commerce. Target shares dropped 9.7% last year even as
the broader market surged, marking its third straight year of
declines.
Target's rebound is due partly to recent efforts to improve
stores and ratchet up its e-commerce business. Other
bricks-and-mortar retailers have struggled. Lingerie company L
Brands Inc., for example, reported a decline in comparable sales on
Thursday for the latest quarter, pushing its shares down 11% for
the day.
Even so, many brands are being helped along by Americans'
increasing willingness to spend. Retail sales in July rose by 6.4%
from a year earlier, data showed last week, suggesting that U.S.
consumers are spending at a much faster pace than inflation as they
benefit from a strong economy and tax cuts, economists say.
Years of an improving labor market have given households more
money to spend. Though rising fuel prices may be one wild card for
the pickup in consumption, economists say they aren't particularly
worried about it yet.
Meanwhile, grocery stores, department stores, restaurants and
clothing stores are all seeing stronger spending, the data show.
While one measure of consumer sentiment hit a one-year low
recently, it remains high by historical comparison.
Beyond the cyclical trends helping these companies, some
investors are betting that younger customers will increasingly shop
at traditional stores as they buy their own homes and have
children.
"What people have doubted is that this next generation is going
to care about bricks-and-mortar retail as boring as Target," said
Tony Scherrer, director of research at Smead Capital Management,
which owns stock in the company and has added to it this year.
"We've taken the other side of the bet."
Though retail stocks aren't as cheap as they once were, they're
still finding favor among Smead and other so-called value
investors. The SPDR retail ETF currently traded this week at
roughly 17 times earnings over the last 12 months, versus more than
21 times for the broader S&P 500.
Still, for all their recent gains, traditional retailers
continue to lag behind Amazon.com Inc., whose stock has soared 63%
in 2018 as it has scooped up e-commerce market share. A strong
economy is helping retailers at the moment, but it isn't solving
all their challenges.
Write to Ben Eisen at ben.eisen@wsj.com
(END) Dow Jones Newswires
August 23, 2018 18:15 ET (22:15 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
Grafico Azioni Nordstrom (NYSE:JWN)
Storico
Da Giu 2024 a Lug 2024
Grafico Azioni Nordstrom (NYSE:JWN)
Storico
Da Lug 2023 a Lug 2024