Cold winds may blow in January, but stocks tend to get awfully hot in the first month of the year. The so-called "January effect" is the phenomenon of stocks jumping higher supposedly in response to the tax-loss selling that occurs in December as investors seek to offset realized capital gains during the year.
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While January this year hasn't exactly been a barn burner -- the S&P 500 is only up about 2.5% for the month -- there are actually a few stocks that haven't enjoyed similar gains. Or any at all, for that matter. In fact, of the 25 worst-performing stocks in January, three of them were well-known clothing retailers.
Kohl's: Down 19.6%
Almost all of Kohl's (KSS 2.83%) losses occurred on one day at the beginning of the month when the retail sector revealed just how bad the Christmas shopping season was. As brick-and-mortar retailers continue to struggle against the Amazon effect -- a much more powerful force than the January effect, depending upon the business you're in -- Kohl's proved to be the worst of the bunch, plunging 19% all at once.
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The retailer said its comparable sales fell 2.1% in November and December, leading to a 2.7% drop in total sales, a result that was exacerbated by its closing down numerous stores. But the department store operator was forced to cut its full-year earnings guidance substantially because of the poor showing, and told investors they could now anticipate its adjusted earnings to come in between $3.60 and $3.65 per share compared to its previous guidance of range of $3.80 to $4.00 per share.
Although the stock has mostly stabilized after the fall, it still is trending south, making January a very chilly month for Kohl's.
J.C. Penney: Down 21.2%
Like Kohl's, the kickoff to the new year wasn't kind to J.C. Penney (JCPN.Q), either. While the Christmas update wasn't very flattering for the department store chain, it wasn't hit nearly as bad as its peer -- the stock only fell about 6% that day -- but that might be because J.C. Penney had been falling since early December and the market wasn't expecting much good news from it anyway.
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Still, even though it survived the early January carnage that took down rivals like Macy's (down 14% in one day), Nordstrom (down 10%), and L Brands (down 9%), J.C. Penney has continued to fall throughout the month as it becomes increasingly doubtful the retailer will be able to live up to CEO Marvin Ellison's promise to turn a profit for 2016. Comparable sales haven't been nearly as robust as originally predicted -- even after they were revised down -- and with comps turning negative during November and December, the picture is looking bleak.
Tailored Brands: Down 23.8%
"Easy come, easy go" is the catchphrase that applies to men's clothing retailer Tailored Brands (TLRD), which saw shares get a big boost in December after it seemed the turnaround at its Jos. A. Bank brand was finally gaining traction, only to lose virtually all those gains in January.
Tailored Brands said in December comps at Jos. A. Bank were down "only" 9%, and while that would normally be considered a disaster for any other company, it was a big improvement for the men's suits retailer that had been regularly reporting comps falling 20% or more for several quarters. The better results led the retailer to raise earnings guidance for the year.
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Although there was no specific news that caused Tailored Brands to start falling again, the general malaise of the retail sector coupled with its own internal weaknesses may have led to the steady decline in its shares. Moreover, with the Bureau of Economic Analysis reporting last week the U.S.' GDP rose only 1.9% in the fourth quarter, it likely helped push Tailored Brands stock down an additional 3.5% as gloom settled more heavily on the sector.
Even so, it still has had one of the best performances over the past year, with shares some 54% higher, but it looks like it will have a hard time replicating that performance in 2017.
