Popular Posts: 5 Crash-Proof Dividend Stocks9 Cheap Stocks to Buy Now for $10 or LessTesla Stock Could Fall Even Lower on Battery Boondoggle Recent Posts: 11 Retailers to Dump Now Why You Don’t Have Enough Saved for Retirement JCPenney Rally Just a Head Fake – Don’t Buy JCP Stock View All Posts It has been an awful year for retail stocks, and there's no two ways about it.
And the icing on the cake has been the ugly earnings reports lately from retailers across the board, typically including crumbling sales and very negative forward guidance.
So, with a very gloomy narrative for a few months weighing on sentiment and a very gloomy forecast going forward, it's not surprising than many retail stocks have declined by double-digits or more year-to-date in 2014 even as the S&P 500 flirts with all-time highs.
So which retailers stink the worst? Here's a list of 11 dogs, and some data on stock performance and sales numbers to illustrate just how ugly things are:
Returns since 1/1/11: -50% vs. 51% gains for the S&P 500.
Revenue Growth Last Year: -5% ($24.4 billion in FY13 to $23.1 billion for FY14)
If you want to find something good to say about Staples (SPLS), you could note that the company is comfortably profitable while some retailers aren't and that SPLS has a decent e-commerce engine. Staples.com is the #2 e-commerce player in the U.S., according to Internet Retailer data.
But the cons far outweigh the pros. The company has a painfully stagnant top line, share price has fallen like a rock and the company just announced plans to close another 225 underperforming stores.
Expect further pain for shareholders and right-sizing for this brick-and-mortar office supply store.
PetSmart (PETM)
Returns since 1/1/11: +38%
Revenue Growth Last Year: 2% ($6.8 billion in FY13 to $6.9 billion for FY14)
PetSmart (PETM) isn't as ugly as some of these other big-box retailers in the long-term, with 38% returns in the last three years or so. But what little momentum PETM stock has had in recent years has evaporated in a hurry as revenue has stalled and pressure mounts.
PetSmart just posted weak Q1 numbers and slashed forward guidance in its May earnings report, causing the stock to tumble 5% in short order. Same-store sales declined, and the CEO admitted a "challenging" market is out there for the pet retailer going forward. That bodes very poorly for the future of PETM stock.
Dicks Sporting Goods (DKS)
Returns since 1/1/14: -25%
Returns since 1/1/11: +15%
Revenue Growth Last Year: 6% ($5.8 billion in FY13 to $6.2 billion for FY14)
Dicks Sporting Goods (DKS) is at least growing revenue modestly, which is better than some of the ugly stocks on this list.
On the other hand, that growth isn't enough to please Wall Street — as evidenced by the crash of 18% in Dicks stock right after its recent May earnings report. In addition to missing on profits and sales, the company dramatically moved its guidance lower.
Traders dumped shares, and a lot of firms including Morgan Stanley and Goldman Sachs downgraded the stock as a result, hinting that the worst is far from over.
American Eagle (AEO)
Returns since 1/1/11: -24%
Revenue Growth Last Year: -4% ($3.5 billion in FY13 to $3.3 billion for FY14)
American Eagle Outfitters (AEO) is facing pressure on all sides. Americans still are pretty tightfisted with their discretionary income, mall traffic continues to decline thanks to e-commerce trends, and consumer tastes have moved away from the clothing retailer.
It all adds up to big declines for AEO stock, continued revenue shortfalls and a gloomy outlook for the forseeable future. No wonder AEO just announced it would be shuttering 150 locations in an effort to right the ship.
Abercrombie (ANF)
Returns since 1/1/11: -35%
Revenue Growth Last Year: -9% ($4.5 billion in FY13 to $4.1 billion for FY14)
Abercrombie & Fitch (ANF) used to be at the top of the teen retail space. if you simply look at performance since January, you may be convinced the company is in the middle of a turnaround … but don't believe it.
Revenue declines have been steep in the last year, and the big reason for outperformance this year was a double-digit run in February after the company reported sales still slipped … but less than expected. Since then, Abercrombie has slowly given back part of those gains, and skeptical traders are still watching the company very closely. There's a chance ANF's comeback may be real … but given the secular pressures on every other retailer on this list, I highly doubt it.
Buckle (BKE)
Returns since 1/1/11: +19%
Revenue Growth Last Year: flat ($1.1 billion for both FY13 and FY14)
The Buckle (BKE) is a smaller teen retailer, operating just 450 or locations and with a market value of about $2.1 billion. That doesn't leave a lot of room for error since it doesn't have the scale of some larger peers … and BKE stock has paid the price lately as a result.
In its most recent earnings report, The Buckle noted same-store sales declined 0.9%, and gross margins fell. With the already troubling long term trend of flatlining revenue, those disappointing metrics have only given investors one more reason to sell — and rightly so.
JCPenney (JCP)
Returns since 1/1/11: -72%
Revenue Growth Last Year: -9% ($13.0 billion in FY13 to $11.9 billion for FY14)
What can you say about JCPenney (JCP) that the numbers don't already show? The stock has simply imploded since 2011, after former Apple (AAPL) retail guru Ron Johnson made changes that scared away customers in droves. Not only is revenue down 9% in the last year, but its down a staggering 33% since fiscal 2011!
Johnson was fired, but the bleeding has continued as the company continues to operate at a loss. There has been a small glimmer of hope lately, with a one-day pop of 25% on hopes that cost-cutting would succeed and revenue declines had finally bottomed … but the end of bad news is not the start of growth, so don't believe the turnaround hype just yet.
Sears (SHLD)
Returns since 1/1/11: -45%
Revenue Growth Last Year: -9% ($39.8 billion in FY13 to $36.2 billion for FY14)
If you think it can't get worse than JC Penney, just check out Sears (SHLD) — a stock that has equally ugly performance in both the short-term and long-term, but without the glimmer of false hope.
Revenue is down 16% since fiscal 2011 and 9% year-over-year. The company is bleeding cash even faster than JCP. CEO Eddie Lampert is notorious for running Sears in a cutthroat fashion, intending to harvesting as much as possible from the retailer as quickly as he can, regardless of the long-term pain it creates.
You'd think such a philosophy would result in, you know, some kind of profits that could be harvested…. But if you own Sears stock these days, you know it hasn’t amounted to much.
Bed, Bath & Beyond (BBBY)
Returns since 1/1/11: +23%
Revenue Growth Last Year: +5% ($10.9 billion in FY13 to $11.5 billion for FY14)
Bed, Bath & Beyond (BBBY) isn't all bad. The company has managed to squeak out modest revenue growth, and is seeing profits rise, too. And long-term returns, while they don't keep pace with the broader market, aren't as abysmal as other retailers on this list.
But when you look at recent trends, the pain could be just getting started at BBBY. Profits declined year-over-year in the company's fiscal fourth-quarter earnings report. Furthermore, the growth rates the company has enjoyed in past years have slowed dramatically as the rebound in home sales has also slowed.
If you believe that household formation or real estate transactions will snap back, then maybe take a flier on BBBY stock. But without those secular tailwinds then Bed, Bath and Beyond could remain under pressure for some time.
Target (TGT)
Returns since 1/1/11: -7%
Revenue Growth Last Year: -1% ($73.3 billion in FY13 to $72.6 billion for FY14)
Target (TGT) stock is reeling in the short-term from the fallout of a very public data breach late last year that cost the company billions and broke consumer confidence in the retailer. But the issues at Target go much deeper than the loss of some customer info.
Take, for instance, the $1 billion loss attributable to disappointing Canadian operations and over-expansion there. Or consider the fact that longer-term, absent the recent privacy concerns, Target had already been pressured by stagnant top-line performance.
If there is a consumer-driven recovery in store for us soon, then perhaps Target can turn around. But given investor negativity and recent revenue trends, I wouldn't bet on it.
Best Buy (BBY)
Returns since 1/1/11: -11%
Revenue Growth Last Year: -14% ($49.6 billion in FY13 to $42.4 billion for FY14)
Best Buy (BBY) got a lot of press in 2013 as a turnaround tale that investors loved, with roughly 245% returns on the year to make it one of the best stocks of 2013 among S&P components.
And while BBY stock is still up based on its pricing from early last year, you can't cherry pick just a 10-month window as proof that Best Buy is back. Long-term, the issue for BBY is the fact that revenue an margins are severely under pressure — and shares reflect this in a big way.
Sure, shares are rallying mildly after its most recent earnings report. However, the earnings "beat" is just a sucker's rally. Revenue fell for the ninth consecutive quarter, and headwinds remain fierce for the big-box electronics store in the age of e-commerce.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor's Guide to Finding Great Stocks. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.
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