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Many analysts are stymied by the strange mix of events in economic conditions. Oil and gasoline prices are at comfortably low prices for consumers and unemployment is reported to be at the lowest point in years. This results in a higher level of disposable income for the average consumer that would traditionally present an optimistic position for retailers with customers beating a path to their doors for not only necessities but even extending into luxury products, automobiles, and home purchases that have been delayed during less pleasant financial conditions.
Yet recent retail results do not bear out that philosophy – even retail giant Target has reported disappointing results:
Target’s stock dropped nearly 10% this week after reporting earnings below analysts’ expectations. CEO Brian Cornell referenced the “increasingly volatile” consumer market that is wreaking havoc for many retailers. There seems to be an unexpected slowdown in consumer purchases that is also causing Target officials to be cautious with next-quarter’s outlook.
Macy’s also missed their forecast for the first quarter with consumer traffic dropping by an unanticipated 7%. This makes five straight quarters of declining same-store sales with a resulting drop in investor guidance for full-year estimates.
Upscale retailer Nordstrom added to the list of those reporting poor results for the first quarter which led to a stock value drop of 13.4% recently.
Apparel retailers, in general, led the stream of lower sales and earnings reporting. Analysts have yet to decipher the trend to determine if the noticeable impact is related to an overall slowdown in consumer activity for department stores and apparel in general or if there are specific markets that are more volatile than the retail sector in general.
There are a few bright spots on the earnings results though – Lowe’s reported earnings that exceeded expectations and pointed to the trend for consumers to invest their funds in home improvements over purchasing new higher-priced homes.
According to retail sector experts – not much. There has been enough volatility in 2016 to shake the nerves of even the most astute and experienced investor or day trader. Most analysts point to the shaky start of the year’s economy and the marked improvement in the beginning of the second quarter, however weak it may appear.
Retail remains a constantly changing and evolving market sector that adds excitement for day trading through the very volatility that raises the eyebrows of long-term investors. New products or fashion trends, oil prices, and global economic news can influence retail results very quickly making continuous monitoring of these factors critical to successful day trading in the retail stock category.
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Disclaimer: SureTrader Blog is not intended for U.S. persons. Stock information is not to be viewed as buy or sell recommendations.