Whether you’re investing in their stocks or working as a buyer, success in retail is all about seeing slightly into the future. Buyers need to be know what’s going to be hot in the next three months if they want to move product. Being too early or a little late are just euphemisms for being wrong and losing money.
No Breakout guest knows this better than Brian Sozzi of Belus Capital. In the attached clip Sozzi breaks out his crystal ball and tells us five things to expect to see in the retail industry over the next 12 months.
1. Macy’s (M) gets a new leader
If it’s possible for a guy who pulled down $25 million in cash and bonuses last year to be underrated Macy’s CEO Terry Lundgren qualifies. In his decade at the top of Macy’s (formerly Federated) Lundgren has rolled up the department store industry, taken the company through the Great Recession and generally emerged as the king of a business model once given up for dead.
With shares of Macy’s up five-fold in five years and all of his major competition vanquished, Sozzi is looking for the 61 year old Lundgren to name a successor this year. Macy’s shareholders’ loss will unquestionably be a gain for stores like JCPenney (JCP) and Nordstrom (JWN).
2. JC Penney turns a profit by Q4 2014
Sozzi is keeping his sell reccomendation on the stock and he’s not expecting anything magical out of the battered Plano mid-tier disaster, but he thinks it’s possible for JC Penney to be making money by this time next year.
“If JC Penney can keep posting double-digit sales gains by the third quarter of 2014 and selling things at 40 and 50% off they could turn profitable by the holiday quarter of 2014.”
3. Staples (SPLS) gets rocked
Not many people know that Staples is the second largest online retailer behind Amazon.com (AMZN). As Sozzi sees it that’s not going to be enough to keep the stock up in the coming 12-months. “I think the stock could die about 25% this year if an activist doesn’t come in and shake up this entrenched management team that is in love with an online business that’s not doing well and stores that are producing negative same store sales."
Online is nice, but Sozzi thinks the virtual world gets trumped by eight consecutive quarters of negative store growth and troubled European operations.
4. Starbucks (SBUX) drive-thrus
Finally a marriage of driving and smartphones that doesn’t cause you to run off the road. Sozzi says 2014 will see Starbucks drive-thrus where orders are placed from your car and picked up at the window.
There are some questions about the business model (“How do you keep people from getting scalded laps?”), but sleepy drivers who don’t want to take the time to get out of the car and aren’t satisfied getting a cup of mud from a fast food joint may finally be able to get their non-fat, no foam venti latte without having to stand in line by the end of the year.
5. Dollar fight! Family Dollar (FDO) and Dollar Tree (DLTR) merge
2013 was a big year for most dollar stores. Dollar General (DG) and Dollar Tree both saw about 40% gains but Family Dollar didn’t share in the love.
Sozzi thinks Family Dollar and Dollar Tree are going to join forces in 2014 to better meet the challenge of the larger Dollar General. Beyond simply being confusing to have so many stores with “Dollar” in the name, the magic of the merger for Tree and Family would be the economies of scale they’d get from being able to compete on a more equal footing with the larger Dollar General.
All three of these stores have benefitted from being more nimble than the monstrosity that is Walmart (WMT), but in a business as cutthroat as discount retail there’s no substitute for size when it comes to getting the best deals from your supply chain.
There you have it: the best of Sozzi’s crystal ball for the next 12 months. Let us know where you think he’s wrong or anything he might have missed in the space below.
- Professional Services
- JC Penney