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Monday, December 19, 2022
Today’s newsletter is by Brian Sozzi, an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Read this and more market news on the go with Yahoo Finance App.
So there I am on Super Saturday — the final big shopping day before Christmas — at my local Target.
My first two thoughts: Why isn’t this store more crowded? And why is there still so much inventory left in this store, especially in seasonal categories such as holiday cards, toys, and party clothing?
While this is just one anecdotal example from one discount retailer in a New York suburb, I think it’s safe to say the holiday shopping season hasn’t turned out like most retailers expected.
Not that expectations were super high headed into the holidays after lackluster third quarter results for most retailers. But sales and margins may even fall short of lowered projections amid consumers keeping one eye on a potential 2023 recession and the other eye on stubbornly high prices (even when factoring in the typical holiday discounts, which have been plenty this year).
A renewed stretch of stock market selling is unlikely helping spending appetite, either.
Here are some other observations on the holidays probably being a letdown for retailers:
United Airlines CEO Scott Kirby told me last week that he is seeing “pre-recessionary” trends in his business. Demand is still strong (as seen in rival Delta’s strong guidance last week), but forward looking bookings may be softening.
Costco (aka the 2022 Yahoo Finance Company of the Year) CEO Craig Jelinek told me he is seeing mixed sales trends in larger ticket, discretionary categories such as TVs and jewelry. I did like what Signet CEO (Kay’s, Jared’s) Gina Drosos told us on demand, however.
Specialty apparel retailer Express disappointed investors this month with its results and outlook. CEO Tim Baxter struck a more cautious tone than the norm with yours truly, Julie Hyman, and Brad Smith on Yahoo Finance Live.
Earlier this month, VF Corp. (Timberland, North Face, Vans, Dickies) warned on its results smack in the middle of the holiday shopping season.
Lululemon’s fourth quarter guidance a few weeks back came in short of estimates.
The November retail sales report last week was a bomb. A new Gallup poll suggests consumers have cut back on their holiday spending budgets compared to a couple months ago.
Big-name retail stocks such as Walmart and Target have under-performed the S&P 500 in the past month. “Our description of a ‘consumer-led’ recession is consistent with an ongoing underweight call on consumer discretionary,” Citi strategist Scott Chronert pointed out in a new note over the weekend.
The next litmus test comes with Nike’s earnings due out on Tuesday after the closing bell.
Overall, I think retailers are sitting on lackluster holiday quarters and that estimates for most in the space remain too high. Pick your retail stocks carefully here, or not at all.
Happy Holidays and as always, Happy Trading!
What to Watch Today
10:00 a.m. ET: NAHB Housing Market Index, December (34 expected, 33 during prior month)