Retail stocks have already priced in strong Black Friday
“It’s not a healthy retail season at all, since we’re coming up from such depressed levels,” said Keith Springer, president of Springer Financial Advisors in Sacramento, Cal.
“Any uptick looks positive and provides a sigh of relief; but. generally speaking, consumers are still over-leveraged and very cautious. The holiday sales figures will likely represent a blip.”
Springer also said that while retail sales have indeed improved, they are nowhere near where they need to be in order for stores to increase supply and start re-hiring workers again — the hallmarks of a true revival in retail.
From an investment perspective, Springer believes retail stocks have already priced in a good Christmas season and that they have little upside — excluding certain niche names like Best Buy (NYSE: BBY), given the continuing high popularity of electronic products, like Smartphones, iPads and DVDs.
Otherwise, the poor economic backdrop will likely lead to more retail companies either folding or merging in order to survive, Springer said.
“Longer-term, many retail stores will either go out of business or combine with other entities as they face a serious price squeeze and increased competition,” he noted.
“Retail stocks are vulnerable; they will need to rack up tremendous sales, given their thin margins.”
“Black Friday no longer is a true reflection of retail sales, but it is symbolically important and will be observed by the market,” Springer commented.
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