Retail Liquidation:
The retail earnings slaughter is the gift that keeps on giving. This week alone there are some high profile names that reported which are down MORE than 20%, including ANF, GOOS and PVH (JILL has been chopped in half). I am sure I am missing some others, and to be fair there have been a sprinkling of good ones with DG and BURL, the latter’s chart however trades wide and loose, hallmark bearish characteristics. Perhaps one sees a pattern here, with just discount names seeming to outperform (although bifurcated action in TGT and KSS). The ratio chart below shows just how weak the XRT has been relative to the S&P 500. In our Consumer Report last week we displayed the bear flag the ETF was showing and it did break below the 42 trigger. For the moment it is being comforted by the round 40 number, but look for further damage to be done.
Nike For The Bronze?
Recently in one of our 5/7 Consumer Report we highlighted the ratio chart of ADDYY over NKE, and it surely showed the former was the superior performer. Today we take a look at another name that may be running past it, pun intended. Below is the ratio chart of Under Armour/Nike and it shows some recent strength for UAA. UAA rose 15 of 21 weeks ending between 12/28/18-5/17 gaining 45.9% from top to bottom. On a YTD basis it is higher by 30% compared to NKE just up 7%. The once mighty giant is obviously still very relevant, but it seems like it has slipped to third place against its peers. Is it time to “Just Do It” on the short side?
Examples:
The recent carnage in the consumer space has been palpable. For anyone attempting a long position it has been challenging to say the least. Below is the chart of a perennial laggard we thought may have turned the corner and was at a good risk/reward entry. We were WRONG on BBBY, and below is the chart and how it appeared in our 5/23 Consumer Report. It has been the subject of takeover speculation, never a valid strategy for going long, but we were intrigued by the gap fill, which if held would record a third higher low. Since 4/10 it has dropped more than 35%, and is another lesson, that trends are more likely to persist, than they are to reverse.