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R.I.P. Retail

As stocks continue to leak lower, major earnings blowups are tearing the retail sector to shreds.

Let’s dive right in…

Earlier this month, I showed you how the retail apocalypse is back with a vengeance this earnings season, decimating shares of old-school names such as Nordstrom Inc. (NYSE:JWN), JC Penney Co. (NYSE:JCP), and Macy’s Inc. (NYSE:M).

With the help of the dreaded trade war jitters, the entire retail sector is under pressure. The SPDR S&P Retail ETF (NYSE:XRT) has dropped more than 11% this month alone, giving back nearly every cent of its year-to-date gains. It looks like we jumped out of the way of this play just in time when we took profits early last week:

XRT

This week, we’re witnessing more wild swings throughout the sector. For brick and mortar retail, volatility is back in a major way.

“The average percentage change for a dozen retailers that have reported so far was 10.4%—a step up even from the past few volatile quarters,” The Wall Street Journal reports. “These sharp moves have partly to do with investors’ access to data that gives them the confidence—and occasional overconfidence—to make big bets on retailers, especially when it comes to short-term trades around earnings. But it also has to do with a return to the pre-2018 retail malaise.”

The mall anchors aren’t the only retail names booking huge losses right now.

Summer is here — and the warmer months are not a good time to sell winter clothing. Just ask Canada Goose Holdings (NYSE:GOOS).

A Canada Goose jacket will keep you nice and toasty for the very reasonable starting price of about $1,000. Despite (or maybe because of?) the hefty price tag, Canada Goose coats were flying off the shelves last year. In fact, GOOS become one of the best performing retail names on the market as shares more than doubled in 2018.

But the Canada Goose fad is quickly melting in the summer heat. Shares cratered more than 30% Wednesday after the company reported slower-than-expected sales growth. After just two years as a public company, it looks like the honeymoon is over for GOOS as the stock finds new 52-week lows:

GOOS

To be fair, this is Canada Goose’s first earnings miss since going public. But it couldn’t have come at a worse time as investors scramble to get out of the way of what they perceive to be a retail sector that’s increasingly vulnerable to an extended trade spat with China.

Speaking of China, GOOS execs seem to think the Asian nation will become a “key source of growth” moving forward. The retailer just opened its first major store in China late last year, Bloomberg notes, and plans to add three more locations in China. But I’m not too sure that’s what investors wanted to hear during a trade war…

Finally, Abercrombie & Fitch Co. (NYSE:ANF) is also circling the retail drain.

The trendy clothing chain announced the closure of three of its flagship stores after missing sales estimates and growth targets, dropping shares more than 25% to new 2019 lows.

ANF

Abercrombie reported weaker-than-expected same-store sales, CNBC notes, due partly to poor numbers from its Hollister brand.

Of course, CEO Fran Horowitz isn’t worried, noting that new services like in-store pickup for online purchases will help bring in customers. Never mind that most retailers have offered store pickup for years. I’m not sure these expanded delivery options will magically fix this ailing retailer’s problems.

Bottom line: If you’re looking for retail stocks in this environment, stick to the big discount names like WalMart Inc. (NYSE:WMT) or Dollar General (NYSE:DG) — which just beat estimates and is rising in pre-market trade. Everything else looks vulnerable in these volatile market conditions.

Sincerely,

Greg Guenthner

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Greg Guenthner

Greg Guenthner, CMT, is the editor of Rude Awakening PRO and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing for 13 years. In 2018, Greg’s Rude Awakening PRO portfolio beat the S&P 500 by 14%.

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