Over the past few days, retail stocks as a group have recovered in price, some quite dramatically.
Some, but not all. One instance of the latter is clothier Express (EXPR 2.91%), whose stock according to S&P Global Market Intelligence was down by over 21% week to date as of early Friday morning before market open. Investors remained cautious about the company despite the estimates-beating quarter it reported over the course of the week.
The surprisingly weak first-quarter results of onetime retail investor darling Target, published last Wednesday, sent shock waves throughout the sector. One typical reaction was that of Citigroup analyst Paul Lejuez, who on Monday downgraded a clutch of popular retail stocks.
While this list didn't include Express, it did feature other shopping mall mainstays. Gap and Children's Place were both knocked down to sell from the previous neutral, while unfortunate Carter's was lowered two pegs from buy to sell.
"Companies are facing higher-than-expected pressure following escalation of fuel/supply chain costs resulting from the war in Ukraine," Lejuez reasoned. "Companies should look to pass thru higher costs to the consumer, but this will likely be harder than it was in 2021 given high inventory levels relative to sales."
In the wake of such sentiments, Express traded down sharply the following day. Thursday followed with a bright spot of good news for the company, as it reported first-quarter results that featured a 31% year-over-year increase in comparable sales, a convincing revenue beat, and a narrower-than-expected net loss.
Express also raised its guidance, although its full-year 2022 earnings forecast fell within analyst expectations. That could very well be the reason why the stock rose on the day, but not enough to make up for its slide earlier in the week.
Investors are snapping up retail stocks that suffered from the Target shockwave. With its latest growth figures Express should present an attractive opportunity like those other titles. Perhaps bargain hunters are going for the more famous names in the sector, as several have seen bigger price pops.