Well, the most American holiday of the year is almost here, and I don’t mean Thanksgiving.
No, I’m talking about Black Friday. Indeed, retailers are already gearing up for their busiest stretch.
With that in mind, I’m giving you my No. 1 tip to beat the Black Friday rush:
Seriously. Instead, check out the top 10 things every income investor needs to know about retailers leading up to the Black Friday insanity…
1. Retail Sales on the Rise
The National Retail Federation (NRF) expects retail sales to be above average this year, due in large part to gas prices that are 11% lower than one year ago. The NRF expects a 4.1% rise in retail sales this year, which would significantly outpace the 10-year average of 2.9%. Last year, sales rose 3.1%.
2. SPDR S&P Retail ETF (XRT) Moves on Up
Meanwhile, retail stocks have been underperforming all year – but that’s quickly changing. SPDR’s retail ETF, XRT, has charged ahead 12.3% since reaching a closing low on October 13. It’s even outperforming the S&P 500 by 3% over that period. XRT has broken through resistance in recent weeks and has now reached new 52-week and five-year highs.
3. Best Buy (BBY) Surprises Investors
It hasn’t been the best of times for Best Buy recently, which is why BBY’s latest earnings report was so surprising. The company not only beat earnings estimates (which it has done for eight consecutive quarters now), but it also reported revenue growth for the first time since Q3 2013. On top of that, BBY raised its dividend from $0.17 per share to $0.19 per share, its first dividend increase since 2012.
4. Macy’s (M) Reaches New All-Time Highs
After hitting a low on October 13, Macy’s has rebounded rapidly to post new all-time highs in November. The ubiquitous department store has rallied nearly 13% in the last seven weeks, and the retailer doesn’t appear to be slowing down, either: Morgan Stanley (MS) analysts expect Q4 outperformance from Macy’s.
5. Kohl’s (KSS) Is Bouncing Back
Kohl’s disappointed investors by missing on third-quarter earnings per share by nearly 8%. Revenue and earnings both dropped on a year-over-year basis, as well. Since then, though, Kohl’s has rebounded by 3.2% and is continuing its upward climb after reaching a closing low on October 31. Analysts are down on KSS, but the clothing retailer sports a low EV/EBITDA of 6.3x and a 2.7% dividend yield.
6. GameStop (GME) Misses Earnings
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GameStop reported third-quarter earnings last Thursday, and the results weren’t pretty: GME missed earnings estimates by 7.17%, and sales were off by over 5%. As of this writing, shares are down 12% on the news, leaving GameStop ranked among the S&P 500 stocks with the biggest gap between its stock price and analysts’ price estimate. GME blames the delayed launch of the new Assassin’s Creed title, but the fact that more consumers are buying games via digital download is concerning in the long run.
7. The Gap (GPS) Gets More Bad News
On October 9, The Gap’s CEO, Glenn Murphy, announced that he’d be stepping down after failing to revitalize the company’s brand. Shares tumbled more than 12% on the news and closed at a 52-week low. The stock rallied after that – but was cut short on Friday after GPS lowered its annual profit outlook. As of this writing, the stock is down more than 5% on the news. Considering the company can’t move its potentially out-of-style clothing, the future doesn’t look bright at the moment.
8. Ross (ROST) Posts Big Gains
On the other hand, Ross Stores is on fire right now, beating Q3 earnings estimates by 7.3% and posting its biggest sales gain in five quarters. Shares are up 25% since hitting a closing low on July 16 and have now reached a new all-time high, making ROST one of the leaders in the recent retail turnaround.
9. Nordstrom (JWN) on a Tear
Nordstrom beat analysts’ estimates for third-quarter earnings and same-store sales. The high-end department store expects “approximately 7.5%” sales growth over the next year, and shares have continued to run on the good news. JWN’s stock is up 10% since reaching a closing low on October 1, and it has outperformed the S&P 500 by 4.9% over that same period.
10. Williams-Sonoma (WSM) Stays Strong
Williams-Sonoma continued its strong 2014 by beating third-quarter earnings estimates by 7.77%. The high-end retailer is up 15% since hitting a low on October 16 and has outperformed the S&P 500 by a whopping 15.5% year to date.
Things are looking up for retail as Black Friday approaches, and sales should be strong. But it’s no secret that harsh winters can put a damper on retailers – so if the whole northeast gets a blizzard akin to the one pounding Buffalo right now, then all bets are off.
P.S. As the holiday shopping season commences, consumers will be racking up thousands of rewards points at their favorite retailers. Well, did you know there’s a way to cash in on these store loyalty programs without making a single purchase? Check out how rewards points have suddenly become the hottest cryptocurrency on Wall Street. Full story.