Are there compelling values among the well-known consumer-goods stocks that reported quarterly earnings this week? Let's review what happened, then see what Motley Fool CAPS thinks of these stocks. Intriguingly, all five of this week's stocks merit only two stars from the CAPS community. Do CAPS investors have reason to lose faith in them?
|
Company
|
CAPS Rating
(out of 5)
|
Change in
Earnings per Share
|
Revenue
Change
|
Impact on
Price
|
|
Williams-Sonoma
(NYSE: WSM )
|
**
|
0%
|
5%
|
(6%)
|
|
TJX (NYSE: TJX )
|
**
|
13%
|
6%
|
4%
|
|
Ann Taylor
(NYSE: ANN )
|
**
|
22%
|
6%
|
3%
|
|
Fossil (Nasdaq: FOSL )
|
**
|
39%
|
20%
|
17%
|
|
Macy's (NYSE: M )
|
**
|
N/A
|
0.3%
|
(7%)
|
Casualties of housing and the slow consumer?
Williams-Sonoma shares fell when the company reported a lower profit, citing the housing slowdown for its woes. CAPS player rochet5 had a prescient idea in September, when shorting Williams-Sonoma: "Pure play on the evaporation of home equity. People can't use those HELOC [Home Equity Line of Credit] to pay to furnish or upgrade homes."
Similarly, Macy's is probably in a very similar boat, given concerns that retailers could be wrecked by the housing market. Macy's may have swung to a quarterly profit, but it's not out of the woods yet. Its revenues squeaked out a mere 0.3% increase, and its shares fell in tandem.
Regarding Macy's, CAPS player xthecritic says:
If you believe the housing crisis will negatively impact consumer spending then you might want to look at short positions in retail. Macy's is a great option. I think this company could be especially hard hit since it is facing a stalling economy only 2 years after the May acquisition. Integration is challenging in any environment but especially so in a weak economy.
On the other hand, here's some short, sweet bullishness from Hassjo on Macy's: "If employment stays at this level, I think people will spend during the holidays. Stock price is down, looking for a nice earnings surprise."
TJX didn't have such a terrible time of it, though. Maybe that's because of its emphasis on lower-priced merchandise. That's why fooluser17 likes it: "In a falling economy, retailers such as TJ Maxx will pick up customers."
However, TDRH found reason to slap an "underperform" on the stock in CAPS:
Probably not the best pick to support a drop in consumer confidence. This retailer offers name brands at discounted prices, but I believe the line will be blurred between mall based and discount chains as mainline department stores will have to offer huge sales/discounts to attract customers. I will be looking for an early exit on this short.
Hot times ahead, or investor beware?
Personally, I'm one of the Ann Taylor bears in CAPS. I've ended my CAPS outperform ratings with most other retailers that target mature females, like Coldwater Creek (Nasdaq: CWTR ) , which seems to be freezing over, and Chico's (NYSE: CHS ) . While Ann Taylor had a promising quarter, it trimmed expectations and is seeing soft traffic trends.
Yet one player who has done well on Ann Taylor in CAPS so far, FoolishJayhawk, takes a Peter Lynchian approach:
My wife loves this place, and can't get enough of it. So, I'll use the Peter Lynch method and add this to my portfolio. Fool on!
I've saved the most exciting selection for last: Fossil. Check out its double-digit growth in quarterly EPS and revenues -- and the double-digit increase in stock price on the news. Can Fossil live up to the lofty expectations priced into a stock with a forward P/E of 20? CAPS player tenmiles, who happens to have a CAPS rating of 99.10, doesn't think so: "Good company but getting ahead of itself at $41.40..."
Personally, I find none of these stocks too compelling at the moment, especially after the cruel October comps most of them endured. Given these stocks two-star ratings in CAPS, I'm betting the community agrees. It might be worthwhile to wait for these names to gain another star or two before you give them serious consideration, unless you've got a super-compelling investment thesis and love contrarian plays.
Related Foolishness:
RSS Headlines
Fool UK