Wall St and Retailers adjusting to a random news flow world...
Remember the beginning of January? Retailers were pre-announcing strong Holiday sales and margins. Consumer Discretionary stocks were on a heater dating all the way back to pessimism lows last August. For every Kohl's or Target falling behind there were two or three Walmart's, Costcos, Victoria's Secret or Amazons; quality names near all-time highs based on nothing but old-fashioned execution.
It all seemed so rational. So fair. "Good news is being rewarded, everyone else is Target" we thought, "Surely nothing can stop us now"
Annnnnd that was the top. At least for now. As we wage into the Meat of retail earnings season next week a theme as emerged and it's sort of thorny. Companies are reporting strong results and guiding 2025 below estimates. Generally nothing disastrous. But words like "value conscious" and "promotional" are being used.
We could let it slide a bit when Amazon said it. Amazon has a lot of spending to do. Same for Walmart. But we're only a couple weeks into these reports and we've heard variants on Beat and Guide Lower from, off the top of my head:
After a while it becomes hard to ignore the trend. Now, all of these companies have their own thing happening. CAVA had enormous expectations, TJX is a group of legendary sand-baggers, Domino's pretty much missed across the board. The details vary but the story is same: All bets are pretty much off for Q1.
A few thoughts:
The Q4 reporting season can be soft for consumer facing companies for a couple good reasons. The buzz of Christmas is just wearing off and the volatility of winter weather genuinely does make the first half of the year hard for consumer companies to forecast. It's smart for managers to be cautious in March then over-deliver in January.
That said, some years are harder than others, as I was reminded of this morning when the latest bit of foreign policy news crossed my social media stream:
2. The impact of all this Tariff action (or non-action) is Large but Unknowable. I tend to be an optimist on stuff generally working out ok but I also lived through December 2018 when a few Tweets about Trump wishing to be called "Tariff Man" sent the S&P 500 down 9% with retail taking a steel-toed boot straight to the throat.
Don't live your life afraid of negative headlines but never forget the lessons of December 2018:
3. The companies where expectations are already pretty much in the toilet but there's a turnaround plan in place have more or less ignored the headlines and even weak guidance.
Nike and Starbucks are absolute poster companies for China exposure in all its potential Trade War forms and, near as I can tell neither has a specific financial plan it's willing to share regarding the current year. The stocks don't care:
I don't want to give any trading ideas away ahead of our larger launch next week but let's just say this by way of a teaser: I really like stocks that go up no matter which way the wind blows.
4) Next week is the Super Bowl of Major Championships of Heavyweight Title Fights in terms of earnings reports worth trading and building themes off. Target, Best Buy and ON all report Tuesday morning. Target just might implode, Best Buy is poised to take shocking amounts of market share if and when anyone buys a TV again and On Holdings is a great company but so freaking expensive it might not matter what the company says.
Suffice it to say I build my trading life around the 4 Retail Reporting Seasons every year. The bar has been a little bit lowered by the recent sell-off but I'm still out-performing for 2025 and looking to keep it that way. Thanks for signing up and stay tuned for a couple insanely busy weeks.
