Like it or not, the holiday shopping season has already begun. But with Black Friday deals coming earlier than ever and Thanksgiving coming exceptionally late, there's a lot of negative speculation surrounding the retail sector.
Like it or not, the holiday shopping season has already begun.
Christmas music is playing over speakers, holiday-themed paraphernalia is lining store shelves … and the markets are wondering how retailers are going to fare over the next six weeks.
With Black Friday deals coming earlier than ever this year, and Thanksgiving itself — the official kick-off to the holidays — coming exceptionally late, there’s a lot of negative speculation surrounding the sector.
And recent quarterly reports and end-of-year predictions from certain recognizable department stores haven’t helped one bit either.
On Thursday, Kohl’s Corp. (NYSE: KSS) reported disappointing quarterly sales, including worse-than-expected same-store sales. And it tightened its fiscal year outlook from $4.15-$4.35 to $4.08-$4.23 on concerns that consumers will keep a closer eye on their holiday expenditures this season.
That’s normally the kind of news that can ramp up expectations at bargain retailers like Wal-Mart Stores (NYSE: WMT). But the chain seems just as concerned as Kohl’s about its short-term future. While third quarter profits did rise 2.8%, that was below expectations — and it’s setting the bar low for its next three-month period as well.
Factor all of that in and you get a number of analysts who are starting to wonder whether Santa Claus won’t be so generous to the retail sector in 2013.
That’s looking more and more likely for some stores. But never fear: There are still companies you can use to plump up your portfolio returns this year…
Starting with Macy’s Inc. (NYSE: M).
Macy’s shows retailers where it’s at
Price-conscience consumers might be trimming their Christmas shopping lists this year, but that’s not throwing off the more high-end clientele Macy’s caters to. It still expects a robust rally this fourth quarter.
Unlike Kohl’s and Wal-Mart, Macy’s is reveling in its latest earnings report. As Chief Executive Officer and Chairman Terry Lundgren bragged:
“We were able to achieve a very successful third quarter of 2013, despite the tepid economic climate. This was our 15th consecutive quarter of improved earnings per share. Our improved sales performance resulted from continued success in the execution of our key strategies — My Macy’s localization, Omnichannel integration and Magic Selling customer engagement.”
And the retailer isn’t budging from its previous predictions concerning full-year 2013. It reaffirmed an EPS outlook of $3.80-$3.90 and same-store sales growth of 2%-2.9%.
Macy’s already advanced 8% directly after the news hit, but it still has further to climb if it can live up to those promises, which it seems confident it can.
With a 22% rise in third quarter profits when so many other retailers seem to be struggling, it’s exciting to think what it can do over Christmas.
Expect Amazon to rule retail this Cyber Monday
Macy’s should do quite well for itself in the next six weeks. But Amazon.com Inc. (Nasdaq: AMZN) will likely do even better on Cyber Monday sales alone.
Cyber Monday, the Monday after Thanksgiving, is quickly becoming just as big of a deal as Black Friday, which netted retailers $59 billion last year, at least $1 billion of which was spent online. (For those of us who consider fighting overwhelming crowds and standing in endless lines — oftentimes in the freezing cold — a mild form of torture, Cyber Monday has even greater significance.)
E-commerce sales on that day keep climbing every year. In 2006, it brought in only $610 million but quickly climbed to $1.46 billion last year. As for 2013, consumers are expected to spend $2.2 billion in e-commerce purchases, a 51% rise year-over-year.
Amazon should collect plenty of that additional profit from all around the world, since it “brought” the shopping “holiday” to Germany in 2010 and Japan in 2012. And plenty of other countries are well-versed in the beauty of buying gifts through the online retailer.
It provides the closest thing to hassle-free holiday shopping consumers can find, and they love it for that offering.
Amazon knows that, and it’s already preparing for a really good run this year. While physical retailers like Target Corp. (NYSE: TGT) are cutting back on their holiday hiring, Amazon is employing 40% more than it did in 2012.
Analysts expect the website-based business to grow 22% year-over year when the final numbers are tallied. And it could very well exceed those predictions, sending the stock up even further.
Between Amazon and Macy’s, this holiday season can turn out to be a very profitable one for savvy investors who aren’t afraid of sorting through an ailing sector for shining success stories.
Jeannette is a member of the Investment U research team. You can read more by her here.
The information contained in this article should not be construed as investment advice or as a solicitation to buy or sell any stock. Nothing published by Physician’s Money Digest should be considered personalized investment advice. Physician’s Money Digest, its writers and editors, and Intellisphere LLC and its employees are not responsible for errors and/or omissions.