(Repeats story first published Friday with no changes to text)
By Noel Randewich
SAN FRANCISCO Nov 25 Wall Street expects
consumers to open their wallets a little wider this holiday
shopping season but bargains among red-hot retail stocks could
be hard to find, especially as profit growth proves elusive for
many big names.
Retailers, including Best Buy, Kohls Corp
and Macy's, that were pummeled in last year's
disappointing holiday quarter have seen their shares surge
recently on expectations that the worst is over, and that an
improved economy will send more shoppers into their stores.
Those gains in recent days have helped push the S&P 500 to a
With U.S. consumers bolstered by wage gains and higher
employment, holiday sales will grow 3.6 percent, National Retail
Federation predicts. Last year's growth was a modest 3.2
percent, short of the federation's 3.7-percent growth forecast.
But some investors believe a healthy holiday shopping season
and higher sales are already built into share prices, with some
surging in the past few weeks. In November alone, shares of Best
Buy and Macy's have each jumped more than 20 percent, while
Kohls' stock is having its best month in more than 16 years with
a 25 percent rise.
"We do not necessarily expect these sales gains to translate
into outperformance for the consumer sectors, but we suspect
they may be good enough to not spook markets," wrote LPL
Financial Chief Investment Officer Burt White in a recent
Not helping matters for stores, mall crowds were relatively
thin on Friday in an underwhelming start to the holiday shopping
A selection of 15 large retailers that are big Black Friday
players, including traditional brick-and-mortar chains and
online heavyweight Amazon, averaged a total return of
12 percent this year, including dividends, according to Thomson
Reuters data. Best Buy's stock has jumped 55 percent in 2016 and
Macy's surged 26 percent.
Expectations that tax cuts under President-elect Donald
Trump could leave consumers with more disposable income have
also fueled gains in the retail sector, with the SPDR S&P Retail
exchange traded fund rallying 10 percent in November.
Since the election, that fund has been a big outperformer,
outpacing most other industry-tracking funds with a 12.2-percent
gain. The wider S&P 500 is up just over 3 percent in the same
That's made it more difficult to find bargains, said Telsey
Advisory Group analyst Joseph Feldman. He recommends Home Depot
, which is benefiting from a resilient housing market, and
Dick's Sporting Goods, which stands to gain market share
following the recent bankruptcy of rival Sports Authority.
Macy's, Nordstrom and other mall retailers have
suffered heavily in recent years due to relentless competition
from Amazon.com, a trend expected to continue even as
retailers refine their own online sales strategies. A consumer
shift away from expensive apparel and toward vacations, home
improvement and electronics has also crippled many retailers.
Still, recent forecasts from retailers are encouraging:
After reporting better-than expected quarterly profit on Nov 16,
Target said it expects consumer spending to remain
strong through the holidays, while Macy's and Kohls have
predicted an acceleration this quarter that could help both
revive their lagging bottom lines.
Macy's has seen year-over-year profit declines for six
quarters in a row. Kohls' profit rose last quarter but had
fallen for the previous four.
The 15 Black Friday retailers tracked by Reuters are
expected on average to grow their revenue by 3.3 percent in the
fourth quarter, which would be better than the 2.5 percent
increase the year before, according to Thomson Reuters data. But
without online shopping goliath Amazon, the group's revenue is
seen edging up just 1.7 percent, slightly better than its 1.1
percent increase last year.
Despite Target's upbeat comments on holiday spending, its
fourth-quarter revenue is seen falling 3 percent, with its net
income shrinking 0.8 percent. Wal-Mart Stores on average
is expected to report a 16-percent drop in net income, while
Nordstrom's net income is expected to fall 2.8 percent.
Best Buy, which is trading near a six-year high, has said
it expects same-stores sales to rise or fall by 1 percent in the
(Reporting by Noel Randewich; Editing by Dan Burns and Nick