Back in November, we posited that the holiday season would be different this year for U.S. retailers, which were set up with easy-to-beat comparable-sales figures and diminishing expectations. The line between winners and losers, we argued, would be drawn in the online marketplace.
According to some early reads on retail data, that could largely prove true. Citi’s Weekly Traffic Report noted that total U.S. retail same-store traffic declined 5.43% year over year for the week ended Dec. 24, 2016, vs. a 6.53% drop last year. Meanwhile, Amazon.com Inc. (AMZN, Financial) said today that it shipped more than 1 billion items around the world this holiday season, giving its shares a boost on a fairly light trading day.
Overall, we expect holiday sales results to come in better than the consensus expects, supported by favorable weather, less aggressive promotions at many retailers, and surging consumer confidence. Among our retail-related holdings, we anticipate that toymaker Hasbro (HAS, Financial) will have a solid season, buoyed by the latest Star Wars film release and related merchandising, and we believe athletic apparel maker Lululemon will benefit from robust sales trends through year-end and beyond. We also still like department-store operator Nordstrom (JWN, Financial), given current low expectations and its established online presence.
*Note: At time of publication, the US Small/Mid Cap Strategy held positions in Hasbro, Lululemon and Nordstrom.
