In what looked would be a promising start to 2019 ended this morning when the entire retail industry got shitholed.
Wave after wave of underwhelming retail reports left Wall Street with a nasty after taste in its mouth and the question of rather; are consumers pulling back on spending or is there some serious trade tensions factoring into the 2019 outlook?
Major imploders include L Brands (-8%), Overstock.com (-8.6%), Fossil (-11.9%), Amazon (-2%) and Macy’s (-18%).
Weak numbers from the retail sector have dragged the entire market down for the day.
2019 might not be the year of recovery like Wall Street had hoped it would be. Rising wages and low unemployment have a tendency to lead to inflationary trends down the road. Rising minimum wages will also not bode well for already weak Retail sector.
We expect further carnage in the future from highly leverage retail stocks that are facing bad comps. The retail business model can deleverage quickly. Costs are fixed, and trends change fast. Furthermore, the shutdown of the Federal government – leading to several million people not getting paid – will need to get factored into consumer spending for Q4, potentially affecting already weak retail companies.