A glance at the U.S. stock market’s main measure for the health of retailers suggests all is well among those companies in the business of peddling stuff directly to consumers.
After all, the $1.16 trillion S&P 500 retail index has climbed nearly 13% this year to a record high, roughly double the 7% gain by the full S&P 500.
That stalwart performance, however, has been delivered almost entirely by a clutch of new ‘retailers’ that now account for more than half of the value of the index: Amazon.com Inc, Netflix Inc and Priceline Group Inc.
Moreover, it masks a broad slump in shares of traditional retailers having their lunch eaten by disrupters like Amazon in particular.
‘Lacklustre show’
When the retail index’s big three gainers are excluded, the group’s aggregate value gained a lacklustre 1.3% this year and is some 8% shy of its high-water mark two years ago. Against that backdrop, next week brings a fresh look at how that old guard of retail is holding up and whether a turn-around in their share performance might be in the offing.
First-quarter earnings reports from Macy’s Inc., Nordstrom Inc., Kohl’s Corp. and JCPenney Co. Inc. are expected to be sobering, but could shed light on whether wrenching turn-around plans launched by some of them, including thousands of layoffs, are starting to bear fruit.
The consumer discretionary sector, which includes the department stores, is expected to show just 3.9% growth, albeit that is up from an estimated 1.4% a month ago.
“There will probably be a knee-jerk reaction the wrong way when we hear some of those larger retailers come out and say foot traffic in the mall is terrible,” said Art Hogan, chief market strategist at Wunderlich Securities.
“Hopefully we don’t start assuming that because people aren’t going to Macy’s the consumer is dead.” Far from it. The government’s main measure of the health of consumer spending, the monthly retail sales report due out Friday, is expected to show overall retail sales snapped back in April after two straight declines.
Of the big four retail names set to report next week, only Nordstrom is forecast to post an increase in earnings per share, and that by just 2.8%, according to estimates from Thomson Reuters I/B/E/S.
