Saturday, July 4, 2009
Wal-Mart and Target - Bellwether Retail Failures
The retail sector in aggregate contains many sloppy, hard to read charts, but clearly retailers are getting and will continue to get crushed in this ongoing deflationary bear market that is not yet close to being over in time or price. Many of the charts are not very exciting from the bullish or bearish perspective right now and are simply in limbo land.
Though retailer stock prices will almost universally resolve to the downside, the charts of bellwether retailers Wal-Mart (ticker: WMT) and Target (ticker: TGT) are telling to me. These are "defensive" stocks, meaning stock brokers recommend them so that their clients only lose 20-40% during a bear market instead of 50%.
When the going gets tough in the economy, people go to Wal-Mart and Target to save money. If these retailers can't benefit from the trends of saving money and frugality, which retailers are going to do well (and I'll give you gun and pawn shops)?
Here are the charts of these two bellwether retailers announcing in loud voices that retailer stocks are toast (first WMT using an 18 month chart and then TGT using a 6 month chart):
Now these two stocks rarely move big and I don't find them exciting enough to bother with, but other retailers will make death-defying plunges and several won't make it through this bear market alive. Ghost malls with multiple vacancies are the new trend and the trend is just starting to pick up a head of steam. I'll leave you with an example of what many retail charts are going to turn into during the remainder of this bear market. Following is a 3.5 year chart of Macy's (ticker: M):