My Retail Naughty & Nice Lists

Of late, I've had a very bearish view on the markets.  For the most part, I still do.  However, in the near term, I think the post-holiday earnings season will have some upside surprises as well as some well-deserved precipitous falls.  After reviewing some conference call transcripts, earnings reports, trends within those, and some personal observations, I think the wheat and the chaff will get distinctly separated in the next round.

Among retail, I think the following companies (by no means a complete list) will surprise to the upside in their next quarterly earnings reports (in no particular order):

Kohl's (KSS)
Macy's (M)
Target (TGT)
Walmart (WMT)
JC Penney (JCP)
Best Buy (BBY)

The following is my Naughty List.  These are companies late to the on-line migration game and poorly managed such that they are, in my opinion, in a free-fall.

Nordstrom (JWN)
Sears (SHLD)

I know there are lots of reports of Walmart and Target having lack-luster crowds, but the Target stores in West Michigan that I saw had full parking lots when I passed them.  Walmart seemed eerily quiet, but their online shopping site was so burdened with traffic that they had problems keeping it working properly.  That likely means that traffic merely shifted to on-line.  Given the history of Walmart on Black Fridays Past, I certainly understand the sentiment - great deals, but unruly crowds.  JC Penney is reporting better than average e-sales, and their stores in West Michigan appear plenty busy.  They's been turning their operations around for some time now and it's showing.  Even their on-line presence is easy to navigate and they offer the brands my family likes to buy.

I was actually shocked at how full the Macy's (M) parking lots were.  They were getting slammed at 10:00 Saturday morning, and Best Buy was almost equally busy.  Nordstrom Rack had an anemic showing at that same time with an all-but-baron parking lot.  The only parking lot more empty was our local Chipotle (CMG) who I don't think was open for business yet, but I typically find that Chipotle low on traffic (in all fairness - location is likely the issue there).  Nordstrom Rack near my home is typically a ghost town, and it seemed even lighter on "Small Business Saturday."  Ouch!

As for Nordstrom proper, nearly everything they offer is either cheaper elsewhere.  They didn't even discount the Fitbit (FIT) Surge that is $199.95 everywhere else on the net (WMT, TGT, KSS, AMZN, etc.).  It's full price ($249.95) at Nordstrom (JWN).  Their management says they've noticed a slowdown in sales and foresee a continuation in these trends.  As for what's working and what's not, they've, "got nothing to point to.  It's just foot traffic."  As to what led to the foot traffic slowdown, They admitted to not knowing why.

I have a few ideas.  They are bested by the likes of Macy's, JC Penney, L Brands, Hudson's Bay, and others.  For goodness sake, herroom.com is better equipped on line.  Listen to the Q&A session.

Sears has been on a downward slide for some time now.  A look at their online trend data compared to others, it's apparent that they're just not functioning toward an ongoing future.

While Kohl's is getting its footing in the e-commerce arena, they are VERY well managed.  I've noticed a general drop in foot-traffic over the years, but in looking at their financial data I can see that their management has done a great job at managing costs while still managing a competitive retail environment.

So those are my lists, naughty and nice.

Disclaimer:  I trade stocks and options so I may at any time have positions, long or short or equivalent, in any of the companies mentioned in this piece.