What happened
Retail stocks, including Wayfair (W 3.88%), Albertsons Companies (ACI 1.81%), Children's Place (PLCE 0.86%), and Express (EXPR +0.00%), all jumped this week as earnings season began to shift to the retail sector and as the S&P 500 touched another all-time high. Generally strong quarterly earnings and CPI data showing that inflation may be starting to cool off helped drive the broad-market index higher. That last item is good news in particular for retailers who can only pass on some costs to consumers before they start to lose business.
There was no single reason that all of these stocks gained this week but there were some common threads. As of market close on Thursday, Wayfair was up 20.3% for the week; Albertsons had gained 19.3%; Children's Place had increased 16.1%; and Express was up 9.5%.
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So what
Wayfair shares jumped last week when the company reported a strong profit in the second quarter even as revenue declined, as the company lapped a blowout performance in the lockdown quarter a year ago. What lifted Wayfair's stock this week was the company's surprise share buyback authorization. The $1 billion repurchase authorization is about 3% of the company's current market value.
That move pushed the stock up 9% on Wednesday, but it was a surprise for a company like Wayfair that has historically been unprofitable and still trades at a pricey valuation. Above all, the move signals confidence from Wayfair that it will overcome the current revenue headwinds and return to strong growth.
Supermarket chain Albertsons jumped on Tuesday after the company announced a key new hire, tapping Sharon McCollam as the new CFO. McCollam had previously served as Best Buy's CFO and is credited with helping to lead the electronics retailer's turnaround.
Children's Place stock rallied during the week, gaining during each session as back-to-school season kicked into high gear and a number of school districts announced plans to go back to the classroom even as the Delta variant continues to spread around the country.
Finally, Express stock has been all over the map as the meme stock has become extraordinarily volatile; but this week it seemed to get a boost from AMC Entertainment's earnings report as the movie theater operator initially moved higher after reporting second-quarter earnings on Tuesday.
Now what
It's difficult to generalize about this group of retail stocks because they are all sensitive to different factors. As an online home furnishings retailer, Wayfair has thrived during the pandemic, but the company is now up against difficult comparisons over the remainder of the year even though remote work favors the company over the long term.
Supermarket operator Albertsons was also a pandemic winner as consumers shifted food consumption from restaurant channels to grocery channels, but that company should also experience headwinds over the coming quarters after posting 10% comparable sales growth in its most recent quarter.
Children's Place and Express are both on tap to report earnings this month, and Children's Place could surprise to the upside once again. The company crushed estimates in its last two earnings reports and the stock is up more than 1,000% since its pandemic-era bottom. Its strength in e-commerce also gives it an edge for a brick-and-mortar retailer.
Express is further away in its turnaround as a mall-based retailer, but the stock is likely to move on its earnings report due to its following among meme stock investors. Analysts still expect losses for the company over the coming quarters as the pandemic put it in a deep hole.
