The retail winners this holiday shopping season
The holiday shopping season is upon us. It's a crucial time for many retailers, with the term "Black Friday" referencing the point when retailers go from being "in the red" to being "in the black."
Storch Advisors Gerald "Jerry" Storch, the former CEO of both Toys R Us and Hudson's Bay, expresses caution over the high numbers reported during Cyber Week sales, stating that the growth likely came at the expense of brick-and-mortar sales.
Although BMO Capital Markets Managing Director Simeon Siegel agrees about being watchful over retail reports, he feels “optimistic” that the holiday shopping season is off to a good start.
The biggest question Siegel raises is how the retailers are going to perform during the lull between Cyber Week and Christmas.
When it comes to the winners in retail, Siegel says those who “predict their demand well are going to continue to win, and those that don’t are going to continue to lose.”
Storch projects that Walmart (WMT), TJX Companies (TJX), Amazon (AMZN), and Costco (COST) will have a successful holiday shopping season. Siegel’s retail winners also include TJX Companies, as well as Ross Stores (ROST), Burlington (BURL), and Coach (owned by Tapestry (TPR)).
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Video Transcript
DIANE KING HALL: But what retailers are best positioned as we look ahead during the rest of this holiday season?
JERRY STORCH The first thing I want to say is be careful with those numbers. You can't take the Adobe numbers out of context and project what's going on in retail. Those are only e-commerce numbers. And most of the numbers that have quoted are just totally consistent with the year-over-year growth that e-commerce has had all along because e-commerce is taking share.
We're not so sure what's happening in bricks-and-mortar retailing. But from what I've heard, a lot of what we saw in growth on the internet was at the expense of bricks and mortar. So be careful. It may not be that astounding a holiday season as people are streaming record numbers on Black Friday. All of that not so clear.
Given that environment, I still think, you know, the winners are those that provide tremendous value. Walmart has done great. I think they're performing as well as I've ever seen them perform. Their position in the area the consumer is focused on, which is closer in necessities, groceries, things like that, they're going to continue to do fantastic.
Costco continues to perform at very high level. TJX, very high level, excellent company, numbers that are fantastic. And then, of course, Amazon because that internet is growing and they are clearly the best on the internet.
Meanwhile, retailer after retailer, the other guys, they're reporting big negative numbers. Sometimes the stock has seen a surge. Like, you know, we've seen that recently with some companies that showed higher earnings than expected.
But look at the sales. Best Buy negative 7, Lowe's negative 7, Nordstrom's negative 7 same store sales, Macy's negative 7, Kohl's down 6, Target down 5, Home Depot down 4. There is a lot of carnage out there on the top line for sure in retailers right now because consumer is not open up their wallet and buying like crazy.
JOSH LIPTON: And Simeon, when you look at your coverage universe, get you in here too, who are some of the winners and losers in retail. Looking ahead, Simeon, break it down for us. Discounters, luxury, athletic gear, what do you see?
SIMEON SEIGEL: Josh Lipton, you bring me back in. I'm keeping notes on the things that I wanted to catch up on. One I wanted to point out that retail is all about storytelling, so back to the turnaround story. Let's keep in mind the marketing.
No, so-- listen, I think that Victoria's Secret reported today, they told us that November feels up. Like, they told us that Black Friday, the weekend, was good. And that obviously is a big store business.
So I think that what we do, everything I've been seeing-- so I generally agree with Jerry that a lot of these numbers we have to take with grains of salt or context. But the people that I'm talking to, what we are seeing, what we're hearing, I think so far the Black Friday weekend, the holiday has gotten off to a good start. I think the biggest question is going to be less did it perform now and more what's going to happen in the lull? We've got a long time between now and Christmas.
So I think that's going to be this interesting dynamic of did the strength that starts, does it carry through? And when we think about what Victoria's Secret said, they did guide January and December to see a material step down. So that'll be one thing worth watching.
But I'm going to-- I'm going to be a little bit more I think optimistic and flag that most of consumer just reported. And from what I'm looking at a little over 50% reported revenue growth and they all saw fantastic gross margin. So I think it is a little bit more of a case by case and, kind of, Jerry went through the winners.
And so I think when I look through this, I'm seeing a dichotomy, but it's not as much group agnostic. I'm seeing a lot of pairings. I'm seeing companies like Athleta see revenues down and we'll see Lulu up, right? You're seeing companies like Coach up and Michael Kors down. They sell the same thing.
And that works with the big box as well and so that works in off price as well. You're watching Nordstrom Rack and Old Navy who have revenues down and [INAUDIBLE] be up. So I think right now we're finally in this environment where winners, people who predict their demand well, are going to continue to win and those that don't are going to lose. That's an interesting retail opportunity. And so that actually makes me a little bit more optimistic.
