Don’t Invest In Big Retailers

ImageYup, it’s still snowing and it’s still freakishly cold… The Winter That Would Not End continues to reign throughout the land. You know it’s serious when it’s just too darn cold to go shopping. That’s what Macy’s (M) claimed this week, as it revealed it was forced to close nearly 30% of its Macy’s and Bloomingdale’s stores during January and February due to the effects of nasty weather. Despite reporting lower sales and lower than expected profits, Macy’s message of hope for spring must have resonated with winter-weary investors. The images of perky spring fashions and sultry Rita Ora in Miami Beach were enough to make Macy’s shares bloom – going from $53 on Monday to more than $58 later in the week.

Also blooming this week for the first time in a very long while… Shares in JC Penney (JCP) and Abercrombie & Fitch (ANF). JC Penney has been through the ringer over the past few years, after it hired the man behind the Apple retail stores, Ron Johnson, as CEO, only to oust him and reinstate the previous CEO, Mike Ullman last year. On top of that, there was the Martha Stewart (MSO) saga, in which the domestic diva broke her exclusive contract with Macy’s to partner up with JC Penney under Mr. Johnson’s watch. The drama hurt both companies, but it seems that the worst is over now and better times are ahead. This week, JC Penney reported its first quarterly sales gain since 2011 (3 years!). Investors rejoiced and shares soared more than 23% – not quite enough to make up for the past year’s losses, but a very promising start to the year.

Meanwhile, over at bad-boy retailer Abercrombie & Fitch… Sales last quarter fell 12% and profits fell by 58%… and yet shares rose by 10% this week! What’s that all about? Although the results were lousy, analysts were expecting much worse and that was enough to buoy the stock. Shares in other teen favorites, American Eagle Outfitters (AEO) and Aeropostale (ARO), were also on the rise and rumour has it that J. Crew has been out meeting with investment banks for a possible initial public offering this year. Seems that retailers are putting a lot of stock into the shopping habits of those fickle Millennials!

Even Target felt the love… Target’s (TGT)  stock (and sales and profits) was hit severely after the big data breach last Thanksgiving, while the company continues to blame Canada for its bleeding bottom line and skinny margins. With 124 stores now in place from sea to shining sea, the company has had trouble with supply issues and customer complaints of higher prices than what they can get cross-border shopping at Target stores in the US. However, despite a whopping 46% drop in profits over the holidays, Target’s rosy outlook for 2014 was enough to get investors humming and shares rose nearly 7%, climbing over $60, the highest point in many moons.

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