I have written about retail stocks as investment ideas in the past on GuruFocus but to quote the great economist, John Maynard Keynes, "When the facts change, I change my mind. What do you do, sir?" As readers probably know, many retailers were crushed this past earnings season. I’ve read the earnings call transcripts to a number of these companies and have concluded that the industry belongs in the “avoid” bucket. The simple reason is I don’t have a clue where consumers will spend their money. As an example, earlier this year, the most annoying clip EVER became viral, the “Damn Daniel” clip. For the latest quarter, the maker of Vans shoes, VF Corporation, credited the clip for 100% sell-through in white Vans for their wholesale channels and patted themselves on the back for their marketing prowess in the earnings call. I have another interpretation. I call it dumb luck. Daniel could have been wearing Skechers just as easily.
Recently, a much more endearing viral video of a lady roaring in delight over a Chewbacca mask generated a lot of free publicity for Kohl’s. The mask normally retails at $30. When I first checked Amazon, the Chewbacca mask was sold out. At the time of this writing, the Chewbacca mask was selling for $91 on Amazon. These examples gave me another reason to be bearish on brick and mortar retail stocks which is anyone can impulse buy anything at any time from any where on mobile devices. This situation diverts discretionary money of the average American who has little in the way of savings. When Vans sales go down next quarter, I wonder if the CEO will blame the sales shortfall on unseasonably strong demand for Chewbacca masks. Continue Reading »