No Holiday Shopping Season Rally for 3 Retailers

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Investors were bombarded with economic data today, most of which was good, but the major indexes still ended the trading session mixed. Both the Dow Jones Industrial Average (DJINDICES: ^DJI  ) and the S&P 500 declined, losing 0.16% and 0.13%, respectively, while the Nasdaq rose higher by a meager 0.02%.

Economic data came in every shape and size today. Housing data from the Census Bureau, which indicated that 444,000 homes were sold in October after only 354,000 changed hands in September. The private sector jobs report from ADP indicated that the economy added 215,000 new positions during November, which was higher than the 173,000 economists predicted. The U.S. trade deficit for October also fell from $43 billion in September to $40.6 billion. But we also saw the ISM nonmanufacturing index decline to 53.9% in November from 55.4% in October.  

Furthermore, the Federal Reserve's Beige Book was released today, which didn't seem to shock anyone but painted a slightly better picture of the economy than many may truly be feeling. The book stated that the labor market had been steady, if not slightly better. In some districts, job hiring was up while unchanged in other areas. Also, the Fed reported that credit quality generally improved and while the tourism and travel industries were likely the worst hit from the government shutdown, that pain was short-lived and nothing too damaging. The only noticeably bad indication was that housing was beginning to soften in half of the regions.  

But all this good news and the larger crowds during Black Friday and the official kickoff to the holiday shopping season weren't enough to help a few retailers today. Shares of Sears Holdings (NASDAQ: SHLD  ) , J.C. Penney (NYSE: JCP  ) , and Express (NYSE: EXPR  ) fell 8.33%, 4.45, and 22.98%, respectively. Let's take a look at why.

Sears declined after it was reported that the company's largest shareholder, Chairman and CEO Edward Lampert, has cut his stake in the company from 55.4% to 48.4%. The stake reduction came as the result of Lampert's hedge fund ESL Partners distributing 7.4 million shares of the retailer to customers who wanted to pull their money from Lampert's control. Lampert or ESL did not actually sell any Sears shares, but this may be a sign that the investor doesn't see the stock being worth more in the future than it was in the recent past. Why would anyone give away a piece of gold for $50 when they knew it would be worth $60 in the near future?  

J.C. Penney's stock declined after the company reported 10% sales growth during the month of November. Additionally, that represents the second straight monthly same-store sales gains for the struggling retailer. While on the surface that sounds great, investors had expected more. The company just recently reinstated reporting month sales figures, which will likely be a rocky road to travel for at least a year, but then should settle down if numbers improve. Investors need to prepare themselves for a volatile stock or get out now.  

And lastly, the big loser: Express. The company reported third-quarter results today, which came in roughly as analysts had expected, but full-year guidance missed the mark. While revenue jumped 7% and earnings per share climbed 15% at $0.23 (slightly below the $0.25 Wall Street wanted to see), management cut the full-year EPS forecast from a range of $1.52 to $1.60 per share down to a range of $1.46 to $1.51 per share. Analysts had predicted full-year EPS to hit $1.61, so the new figure not only missed that mark but represented a solid cut from what the C-Suite felt the company would do earlier in the year.  

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