[3 Must-See Charts] Here’s What Rattled the Retail Comeback

We’ve marveled at brick and mortar retail’s resilience in the wake of Amazon’s most dominant stretch yet…

The retail sector started 2018 trading on the comeback trail. The last time we updated you on its performance, the group had just capped off an impressive three-day run that pushed its year-to-date gains to almost 6%.

Traders were blowing the “death of retail” trading theme to pieces as the sector streaked ahead of the Nasdaq during the January melt-up. Old-school retail names like J.C. Penney (NYSE:JCP), Macy’s (NYSE:M), and even Sears Holdings (NASDAQ:SHLD) were leading the charge higher. Many retailers looked poised to enjoy an extended undercover comeback move — even as Amazon continued to attract all the media attention thanks to its online dominance.

But the February correction changed everything.

While most of the market’s leading sectors have recovered from the February drop, retail is stuck near its lows. Now an avalanche of bad news (and bad timing) is threatening to erase the sector’s first-quarter comeback.

Let’s check out the charts…

1. A Post-Holiday Retail Fade

The SPDR S&P Retail ETF (NYSE:XRT) reignited its bull run during the busy holiday shopping season. Its furious gains continued during the January melt-up.

But once holiday earnings started to pile up, investors started to notice that reality wasn’t exactly lining up with their expectations…

Retail Rolls over

XRT rolled over in February and has not recovered. The retail ETF is in the red for the year and is now threatening to press its February lows.

2. Grocery Wars: Walmart Strikes Back

The escalating grocery battle between some of the world’s biggest companies is quickly becoming one of the biggest retail stories of 2018.

Amazon.com (NASDAQ:AMZN) is out front, pushing to make organic food more affordable at Whole Foods and developing its Amazon Go concept store.

But there are some new challengers on deck…

As we’ve said before, Walmart (NYSE:WMT) remains hot on Amazon’s heels and isn’t going anywhere. That’s why we weren’t surprised that America’s biggest brick and mortar retailer announced big plans to expand its grocery delivery business.

Walmart isn’t messing around. The company is rolling out its delivery service to 800 stores over the next several months, according to Business Insider, which should reach about 40% of U.S. households by December.

The timing of this delivery gambit is critical. Walmart shares — which had mirrored Amazon’s performance for most of 2017 — have fallen off the pace since the February correction.

Can Walmart Recover

No other major grocery has cracked the delivery code. If Walmart succeeds, it would be the huge win that brick and mortar needs to continue its fight against Amazon’s online onslaught.

3. America’s Favorite Toy Store Bites the Dust

While Walmart valiantly fights back against the e-commerce beasts, legendary toy store Toys “R” Us is closing its doors for good. The company announced it would liquidate its inventory and shutter its 700+ locations over the next several months.

The news wasn’t a total shock. After all, Toys “R” Us already filed for bankruptcy back in September. The brand won’t totally disappear after the closings, either. Management is still looking to sell its online operation, per The Street.

While Toys “R” Us isn’t a publically traded company, its demise still managed to rattle the market. Toy maker Hasbro Inc. (NASDAQ:HAS) is in freefall after the news. The stock is tanking to fresh 52-week lows as I type…

Hasbro

Looks like investors are thinking less foot traffic at physical stores like Toys “R” Us means fewer impulse buys for toy companies like Hasbro. That’s just more collateral damage in Amazon’s bid for retail supremacy…

Sincerely,

Greg Guenthner

You May Also Be Interested In:

Greg Guenthner

Greg Guenthner, CMT, is the editor of Opening Bell Fortunes and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing since 2005. In 2019, the average position in Greg’s Sunrise Fortunes portfolio outperformed the S&P 500 by 1.65x.

View More By Greg Guenthner