Retail Related Rapping: Gap, Zumiez, Target, Costco...
Customers simply don't buy winter clothes until it's actually cold outside. September was warm so the sales get pushed back.
Make sure you also review Prof. Macke's Predictably Horrible September Retail Sales for more in depth retail coverage.
- The retailers continue to trade generally strong, considering the weak news flow. If I were compiling evidence for the case that the trading risk/ reward set-up favors a long position, regardless of a slowing consumer I'd offer Gap (GPS) and Zumiez (ZUMZ) as exhibits A and B.
Gap turned in a month you shouldn't handle with bare hands and lost a key executive. The stock is flattish. Zumiez (and yes, emailers, I know it's "Zoom-EEZ"), beat and is popping 10%.
- The brilliant Justin pinged me asking if it's a legit point to say that warm weather delays sales this time of year. Don't tell the retailers I said so but the answer is a qualified yes. Customers simply don't buy winter clothes until it's actually cold outside. September was warm so the sales get pushed back. Now it becomes a game of merchandising chicken as customers shiver and wait for the mark-downs.
In bigger-trends, you see a similar impact on Christmas due to gift cards. At this point, you don't really know how Christmas was until the first Thursday of February, when January Same-Store-Sales come out.
- The trade, from where I'm perched, remains gathering good merchants (Costco (COST), Target (TGT) and Macy's (M)) on weakness and keeping everything else on a very short-term trading leash (if you want to trade them at all).
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