5 Retail Stocks Jim Cramer Hates This Holiday Season
Fossil (NASDAQ:FOSL) Disliked at $99.33; trading at $97.40 at the time of this writing.
Fossil reasonably priced, quality merchandise will provide budget conscious consumers with affordable gift options for the holiday season which should be reflected in the company quarterly report next week. Traditionally an accessories retailer centered on watches and handbags, Fossil improved its earnings potential and growth outlook by diversifying its product offering to include clothing over recent years. Fossil has a tendency to fall dramatically after reporting its quarterly operating results and then recover past the point of origin before the end of the following quarter. This pattern of drastic swings is made evident by its 52 week range of $61 $135 per share. Increasing raw costs paired with cash strapped consumers has made retail stocks more prone to volatility. Because of its reputation of affordability, Fossil doesn have the pricing power or profit margins of other high end retailers. Fossil predictable swings makes it more of a trading vehicle than a long term stock to own. Fossil is emphasizing growth as a reason to own the stock going forward. Fossil year over year quarterly revenue growth is 34.9% and its price to earnings growth ratio is 1.18. Fossil 23.80 price to earnings ratio is equal to the average PE ratio for the consumer durables industry. A buying opportunity may be presented if the stock falls after is quarterly reporting.
Ralph Lauren (NYSE:RL) Disliked at $157.39; trading at $155.52 at the time of this writing.
With a market cap of $14.25 billion and year over year quarterly revenue growth of 32.40%, Ralph Lauren is the largest retailer of its direct competitors The Jones Group (NYSE:JNY) and PVH Corp. (NYSE:PVH). PVH Corp. has a $4.94 billion market cap and 21% YOY quarterly revenue growth while The Jones Group has a $969.22 million market cap and 2% quarterly revenue growth. However, it would be wise to proceed with caution when considering the stock. Estimates for Ralph Lauren last quarter were too low and, naturally, the company reported what was seen as a terrific quarter as a result of it. Based on those numbers, expectations for this quarterly report may be too high and the stock may get punished as a result. Ralph Lauren was downgraded to by Citi back in September. Ralph Lauren fundamentals make a strong case for owning the stock, but it may prove better to buy the stock after the stock gets hit after reporting results this week.
HHGregg (NYSE:HGG) Disliked at $14.08; trading at $14.52 at the time of this writing.
Unlike HHGregg primary competitor Best Buy (NYSE:BBY), Cramer said HHGregg may be worth owning throughout this holiday season. Steep price cuts and discounts are expected and HHGregg CEO, Dennis May, said the company will be promotional to generate holiday sales. HHGregg stock shot up 20% after reporting spectacular second fiscal quarter operating results. The retailer reported a net sales increase of 28.6% to $618.6 million along with a 1.5% increase in comparable store sales. A much smaller company than its rival, HHGregg has a price to earnings growth ratio of 0.92 compared to Best Buy PEG ratio of 0.85. HHGregg is trading at 13.31 times earnings and has 28.6% quarterly revenue growth (year over year). Best Buy comparable revenue growth is a paltry 0.10%. An operating margin of 3.75% and a gross margin of 29.85% makes HHGregg a safe way to play electronic retailers this holiday season.
Best Buy (BBY) Disliked at $27.01; trading at $27.31 at the time of this writing.
This ailing electronics retailer has a stock worth avoiding. Best Buy stores may have plenty to offer customers, but the stock 2.3% dividend yield is hardly enough to entice investors. Cramer quipped that Best Buy should be renamed to Browse due to the growing trend of customers using the store to see and test a product before purchasing it online through a retailer like Amazon (NASDAQ:AMZN), which may offer a better deal. Online retailers like Amazon can offer better deals on many products because of less overhead in operations. As a result of this increasing loss of market share, Best Buy is shifting some of its focus to offering services. company Carphone Warehouses mobile JV unit in an effort to enhance its wireless centered stores. The retailer will also acquire mindSHIFT Technologies, which provides IT services for medium and small sized businesses. Best Buy will abandon its plan for European expansion after announcing it will close all 11 of its unprofitable stores in Britain. Best Buy year over year quarterly revenue growth of 0.10% fails in comparison to Amazon 43.9% quarterly revenue growth. Best Buy may be cheaper than Amazon on a price to earnings basis, 8.83 and 114.29 respectively, this is clearly because of Amazon soaring prospects and Best Buy declining revenue and market share.
Macy (NYSE:M) Disliked at $31.47; trading at $31.36 at the time of this writing.
The department store operator said monthly sales rose 2.2%, which missed the 3.6% analysts estimated. Nordstrom (NYSE:JWN), Macy rival, reported a 5.4% increase in sales, which was also smaller than expected. Nordstrom cited their weaker than expected sales to weakness in the mid Atlantic and Northeast region. economy. Dillard (NYSE:DDS) actually beat their 3.7% sales estimate by reporting an 8% rise in sales. Dillard has no exposure in the Northeastern region in which Nordstron struggled with. Macy said warmer weather in the earlier part of October delayed the purchase of winter wear. Macy stock trades at 13.23 times earnings and has a PEG ratio of 1.5. The stock has a quarterly revenue growth (year over year) of 7.3%, which is lower than both Nordstrom 11.7% and Sak (NYSE:SKS) 13%. If Macy stock reacts poorly after the company reports a decent number, Cramer suggesting selling Kohls (NYSE:KSS) and Nordstrom before they report on Thursday.