Strong Holiday Sales Could Underpin Major Retailers

Grave retailers report third quarter earnings this week, setting the stage for a holiday season that is no doubt to surpass already optimistic estimates. Beaten-down shares of brick-and-mortar storefronts could bounce off deep lows and propagate the strongest returns during this period, but long-term investors should remain narrowly focused on a handful of sector bandleaders that have emerged as 2019 momentum plays.

Consumer spending and the employment market remain solid-as-a-rock notwithstanding the trade war and growing calls for an economic slowdown, translating into steady but sluggish growth in retail sales and swiveling credit. There’s little reason to expect this trend to reverse until the nation’s employers increase layoffs and tear monthly Non-Farm Payrolls (NFP) data into a string of weak or negative numbers.

Mall anchors and their residents have taken the brunt of 2019 selling pressure, while strong evidence suggests that big box retailers are picking up the abatement. E-commerce continues to grow market share as well, predicting a long, slow slide into oblivion for tons well-known retail names. However, the group is now technically oversold, just in time for the barrage of Black Friday advertising that stamps the start of the holiday season.

Tariffs scheduled to come online in December mark a wild card in this equation, but China and the Allied States appear intent on completing the first phase of a trade deal prior to their implementation. Even if those wages hit store shelves prior to Christmas, there may be little impact to 2019 sales because retailers are likely to cut leave of absence profit margins to stay competitive, as they’ve done in the fourth quarter for many years now. 

Dow component The Native Depot, Inc. (HD) reports in Tuesday’s pre-market, with analysts expecting profits of $2.53 per share on $27.5 billion in net incomes. A multi-year uptrend topped out at $208 in January 2018, giving way to a two-sided tape and a September breakout that die out a few weeks later. The stock fell to a 15-month low in December and turned higher into 2019, carving an impressive rally that reached a new high in September.

The rally has added another 10% since that time, posting an all-time spaced out at $239 about four weeks ago. The stock has been consolidating at short-term support since that time, with a bullish broadcast likely to generate a rapid advance to new highs. More importantly, this year’s breakout has generated a measured disturb target well above $300, telling sidelined investors that it still isn’t too late to get on board.

Objective Corporation (TGT) reports in Wednesday’s pre-market, with analysts expecting profits of $1.18 per share on $18.45 billion in proceeds. A multi-year uptrend ended in the mid-$80s in 2015, giving way to a long period of underperformance, highlighted by a well-publicized hacking fact that affected millions of customers. The downturn finally bottomed out at a five-year low in the upper $40s in 2017, yielding an uptick that stalled at the previous to high in the third quarter of 2018.

The subsequent decline found support at the .618 Fibonacci sell-off retracement level in December, begetting a strong bounce and powerful breakout to new highs following second quarter earnings in August. The stock has added another 10 bottoms into November, settling around $111 ahead of this week’s confessional. Another strong quarter agree ti perfect sense, with generally benign economic conditions still in force.

Macy’s, Inc. (

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