October generally kicks off the year's holiday shopping season, so when several U.S. store chains reported disappointing October sales on Thursday morning, it gave investors and retailers some cause for concern.
"Major retailers ranging from Macy's (M) and Saks (SKS) to those catering to more frugal shoppers like Target (TGT) and J.C. Penney (JCP) all reported lower-than-expected sales at stores open at least a year," reports Reuters.
"Even companies that have regularly beaten Wall Street forecasts had a disappointing October."
This comes in contradiction to the stock market's overall increase in October and a competitive price-slashing approach taken on by many retailers -- positive indications consumers would be more likely to spend.
But continued market volatility, high unemployment, uncertainty about the future, a directionless government, and a "barrage of scary headlines" have won out.
"This uncertainty, the news changing every day, it causes a freeze," said Wharton School professor Barbara Kahn to Reuters.
Retailers hold out hope for a profitable holiday season
Although October is typically the third-smallest month for sales, retailers are desperate for sale boosts and have made a decision to start off the holiday shopping season earlier than ever. The highly anticipated October sale reports numbers are supposed to serve as a forecast for that all-important season.
Not all reports were dismal. "Bright spots included Kohl's (KSS), which reported a 3.9 percent gain, and Nordstrom (JWN) and Zumiez (ZUMZ), which also beat forecasts."
Retailers are surely hoping the October numbers do not serve as an indication of how the holiday sales will play out.
Investing ideas: Extreme pessimism
So, which retail / consumer stocks are most vulnerable to a slowdown in consumer spending?
To help you find ideas, we collected data on about 180 consumer stocks. Below, we've listed the names that have seen significant institutional selling. In addition, all of these companies have seen a sharp increase in shares shorted over the last month.
Sophisticated investors, like short-sellers and hedge funds, think these consumer stocks are in deep trouble -- do you agree? (Click here to access free, interactive tools to analyze these ideas.)
1. Dillard's (NYSE: DDS ) : Operates as an apparel and home furnishing retailer in the United States. Net institutional sales in the current quarter at -5.4M shares, which represents about 17.9% of the company's float of 30.16M shares. Shares shorted have increased from 6.58M to 7.00M over the last month, an increase which represents about 1.39% of the company's float of 30.16M shares.
2. 99 Cents Stores (NYSE: NDN ) : Engages in the retail sale of consumable general merchandise with focus on name-brand products. Net institutional sales in the current quarter at -5.1M shares, which represents about 11.68% of the company's float of 43.65M shares. Shares shorted have increased from 4.29M to 5.93M over the last month, an increase which represents about 3.76% of the company's float of 43.65M shares.
3. The Cheesecake Factory (Nasdaq: CAKE ) : Operates upscale, casual, and full-service dining restaurants in the United States. Net institutional sales in the current quarter at -1.8M shares, which represents about 3.44% of the company's float of 52.31M shares. Shares shorted have increased from 10.39M to 11.09M over the last month, an increase which represents about 1.34% of the company's float of 52.31M shares.
4. Companhia Brasileira de Distribuicao (NYSE: CBD ) : Operates as a retailer of food products, clothing, home appliances, and other products through its chain of hypermarkets, supermarkets, specialized and department stores, convenience stores, and the Internet in Brazil. Net institutional sales in the current quarter at -7.4M shares, which represents about 8.85% of the company's float of 83.66M shares. Shares shorted have increased from 4.16M to 6.03M over the last month, an increase which represents about 2.24% of the company's float of 83.66M shares.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Eben Esterhuizen and Rebecca Lipman do not own any of the shares mentioned above.
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