This season has not been good for retailers. The news of a data breach on Target’s (TGT) website is nothing compared to signals from many analysts both on Wall Street and beyond that Americans just weren’t buying as much this year as an economic recovery would suggest. The hardest hit stock so far is Michael Kors (KORS), which is down on a recent sell-side downgrade, but other stocks may be challenged both in apparel and beyond. It seems this wasn’t a particularly active holiday season for retail.
What about ecommerce? Paradoxically, news that UPS failed to deliver all orders before Christmas could indicate a surge in demand for ecommerce, benefitting obviously Amazon (AMZN) and Ebay, but also being a positive signal for other companies that rely on ecommerce, like Google (GOOG).
In reality, research from specialty companies like eMarketer have said that yearly growth for ecommerce was smaller this year, suggesting that online retail hasn’t filled the gap seen at brick and mortar stores.
If people are shopping less this holiday season, no matter what the reason, retailers and consumer-facing brands (M, COH, ANF, GPS, COST, WMT, ROST) will suffer. Yet the market hasn’t been terribly spooked by these warning signs, suggesting that the research picture is being taken with a grain of salt by investors.
Early January will be an active time for retail and apparel names as more reports come in and the market decides on optimism fueled momentum or trepidation that the Santa Claus rally was premature.
Consumer names almost always have a spike in volume after the holidays, but this may be more extreme in 2014 as the market sifts through the signals from research and the press releases of the companies themselves. 1Q earnings calls will be unusually busy for any investor focused on the retail sector–and stressful.