Almost everyone is predicting a lackluster retail sales number for April 2016. On Friday, May 13th, 2016 we will learn about retail sales in the month of April. The Wall Street expectations are for sales to be up 0.8% and up 0.4% excluding auto sales. These are aggressive expectations with Kohl’s, Nordstrom and Macy’s all taking a beating after their most recent earnings reports.
Most would agree that department stores are taking the worst of the beating when it comes to consumers deciding to spend their hard earned cash. Stores that have printed cash over the last nine months include Ulta, LKQ, dollar stores, Tractor Supply and Autozone. Speciality retailers are doing very well while big box retailers and department stores are lagging.
This makes us wonder if the retail sales numbers will offer a great opportunity for investors to jump into some of the aforementioned names. Stocks we like right now include ULTA, LKQ and DG. If April 2016 retail sales come up short of expectations almost every retail stock will likely sell off on Friday. This comes two days after the worst day in four years for retail stocks. On Wednesday, May 11th, 2016 some of the most popular retail names were off over 5%.
If you have been waiting to get into some of the better retail names, Friday might be a great time to do so. Even if the retail sales number comes in strong, many retail names have been beaten up over the last few weeks even though they have shown strong earnings over the last several quarters. We admit that department stores and non speciality retailers are struggling but there are still plenty of great names in the space.
By the time the market opens on Friday, we will know where retail stocks are headed. No matter what happens, we still think it is a great time to get into speciality retailer names.