Skip to main content

Retail Renaissance!

Next week starts the biggest shopping season of the year in US with Black Friday. Millions of people would be heading to malls to spend on holiday gifts. And given that people were stuck at home for last year with only option of online shopping, this year they want to go in malls in person and enjoy the shopping. That brings me to my blog topic - is this the Retail Renaissance? (The Renaissance was a fervent period of European cultural, artistic, political and economic “rebirth” following the Middle Ages)

During depths of COVID pandemic, most of the in-person retail (except for essentials) was closed for multiple weeks. Holiday shopping of 2020 was mostly online. Since people were scared to go out.  Online giants like Amazon did a wonderful job in delivering everything from essentials to holiday gifts. No wonder stocks of traditional retail companies were trading as if they are going out of business. Retail was facing double whammy - short term pain of Pandemic and long term threat of online shopping!

Retail companies were just trying to survive to see another day! After surviving busted 2020 holiday season, 2021 brought new hopes to retail companies. Thanks to some clever financial maneuvering and ardent supporters, most of these companies survived. Looking at multi-fold increases in their stock prices from pandemic lows, it definitely feels like they had rebirth. Let's check out some of the examples:

  • Macys (M) - went from $5 to $35
  • Kohl's (KSS) - went from $12 to $57
  • Bed, Bath and Beyond (BBBY) - went from $5 to $23
  • Dave and Busters (PLAY) - went from $8 to $36
  • Cheesecake Factory (CAKE) - went from $16 to $42
  • Target (TGT) - went from $92 to $250
  • Simon Property Group (SPG) - went from $50 $166
And then we have meme stocks like 
  • AMC - went from $2 to $40
  • Gamestop (GME) - went from $4 to $228
What's next and are there still opportunities in participating in Rebirth of Retail?

As they say - "Never waste a crisis". Looks like at least some players in retail used pandemic induced crisis to transform themselves to deal with long-term threat of online shopping. Let's take the case study of Macy's. This storied department store created strong omnichannel with mix of online and in-person shopping. Looking at latest quarterly results from company, it seems to be working. Despite supply chain issues which many high tech companies are facing, Macy's (as well as Walmart and Target) seem to have good handle on supply chain. Sales thru online as well as Macy's app are growing at double digits. Activist investor Jana Partners is asking Macy's management to separate and list online unit (similar to what Saks plan to do in early 2022) to maximize shareholder returns. No wonder Macy's stock has already climbed from $10 to $36 in 2021 (300% more return than online retail giant Amazon). And despite these big jumps in stock prices, they are still reasonably valued at less than one times sales. If these companies are able to successfully transform with following
  • Provide Amazon type customer experience (Free shipping, convenience of returns) 
  • Pleasure of walking the aisles and touching the goods before buying 
  • Fun shopping experience with families and friends
  • Sound financial management for maximum shareholder returns
It's possible to dream returns like Restoration Hardware (RH) whose stock went from $35 to $700 in less than 5 years (Disclaimer - I am not claiming it would happen to stocks like Macy's but it's possible that Macy's stock could beat S&P in 2022). 

Isn't this Retail Renaissance?

Have a great Thanksgiving.

/Shyam

Comments

Post a Comment

Popular posts from this blog

2025 = Is it going to be 1997 or 2000?

Happy Holidays... After 5 months of hibernation with no real reason than writing block, I decided to use quiet morning of Christmas day to start writing again. Lot has happened in last 5 months - in particular release of Animal Spirits with Fed starting interest rate reduction cycle and historic victory of President Trump for 2nd term. As the year turns into 2025 and stock markets at all time high, one would wonder, what's next?  To answer this, one needs to look back at 1920s and 1990s to give us some context on where markets may be headed. 1920s saw invention of televisions, radio, wider adoption of cars, vacuums, penicillin and many other which we consider household items now. These inventions created roaring 20s with markets going up by 500% eventually leading to crash of 1929. However during mid-20s, markets keep going up due to excitement of these inventions and end of World War-1 and Spanish Flu Pandemic. 1990s also saw many inventions - the key being launch of Netscape in 1...
Post a Comment
Read more

And the Oscar goes to...

It's Oscar Sunday and time for predictions for few categories - before I digress into talking about drama in DC or markets.  First of all, I want to recognize the damage LA fires have done to the beloved areas of Los Angeles and impacted families across all spectrums. My heart goes out to them and wish them recovery and rebuilding of their lives... This year's Oscar nominees and post nomination period had been interesting to say the least. Due to this, the field is wide open in almost all categories and that's what makes prediction game so interesting. Just to set expectations, I would consider a win if I get even 50% predictions correct given the dynamics of nominees this year. So here are my predictions - "And the Oscar goes to..." Best Picture - Anora (surprise could be "The Brutalist") Best Director - Sean Baker for "Anora" (Surprise could be Brady Corbet for "The Brutalist") Best Actor - Adrien Brody for "The Brutalist"...
Post a Comment
Read more

The Politics and Gamesmanship of TikTok!

TikTok is less than 3 hours from going dark on USA's east coast if TikTok owner Bytedance (and Chinese Government) follows thru its "bluff" to honor the law " Protecting Americans from Foreign Adversary Controlled Applications Act" which goes into effect on Jan 19, 2025. And suddenly there is lots of politics and gamesmanship around TikTok.. Let's look at the players and their positions US Congress: The " TikTok Ban" law was passed by congress with bipartisan support and coincidently it goes into effect one day before new administration takes charge. Everyone knew the exact date and time of oath taking ceremony of new President...but maybe the congress did not think that there would be change of President and did not bother to put effective date post new government taking charge...that created a window of 36 hours of "law being in effect" unless... President Biden: Biden himself did not think that he won't be President for 2nd term. S...
Post a Comment
Read more