Despite the SPX being back at all time highs, there is no shortage of single stock examples in the consumer/retail sector showing signs of strain. On Friday I broke down last week’s consumer related news, that ranged from a modest same store sales beat for COST, to nasty earnings misses from LL, PBPB & TCS causing huge one day declines, to the Fed’s caution on the stalling housing market. What I find curious is that investors seem to merely be sweeping the individual blow ups under the rug, while suggesting the continued weakness is stock specific. Whether it be sluggish top line in big box and dollar stores, or declining margins in high end grocery to near implosions in luxury and high end discretionary brands, there are few pundits who believe the “one offs” amount to a trend and should be cause for concern for the health of the economy.
So why do I keep bringing it up? Because some of the worst price action in the entire market has been and continues to be in the consumer/retail sector, a major pillar of our economy. And some of the worst charts I have EVER seen reside in the space:
WFM 5 Year:
COH 5yr chart:
TGT 5 yr chart:
BBBY 5yr chart:
I know I know, what about CMG, YUM, WAG, M, JWN, UA, TIF, NKE, SBUX? The out-performance is few and far between, and the latter two are merely flat on the year, and I could list the massive under-performance ytd in BBY, GME, DNKN, FDO, DG, HD, LOW, LL, PNRA, RL, TJX, WMT, WHR. The list of poor performers greatly out-numbers those of the prior group, and it appears to be growing.
KORS is today’s example of once great retail story that could do little wrong and was trading at a premium multiple to its peers and the market. The stock is now giving up a large part of its ytd gains and from purely a technical perspective looks precarious and possibly setting up like many of the other charts shown above.
The stock today has broken the uptrend that has been in place since its IPO back in 2011, and is now below its 200 day moving avg (yellow) for the first time and is flirting with the breakout level from earlier this year:
When these once loved consumer names see a break in upward momentum, they usually have a sustained break, and very few over the last year have seen snap-backs higher.
KORS is expected to report their fiscal 2015 Q1 earnings in the first week of Aug, and if there is the slightest hiccup to results and or guidance I suspect investors will shoot first and ask questions later. On a near term basis $80 should serve as decent support, with $80 to $75 as the likely target on less than stellar results:
A trade we would consider on a bounce (not here) would be a put fly in August targeting the 80 level. Right now the 87/80/72 fly is about 2 dollars which we wouldn’t want to do on a down day like this but could be interested a little higher. And even bigger bounce before earnings might make the Aug 90/80/70 worth looking at. We’ll be keeping our eye on this one.
If this growing list of “One Offs” or “stock specific” weakness in the consumer / retail space becomes a trend, set ups like this will become very attractive to short term catalyst driven traders.