Inside Arbitrage Friday Wrap – Retail Armageddon

FRIDAY WRAP

Our list of curated tweets for the current week

First they came after Party City (PRTY) and its greater than 60% plunge in a single day after reporting a surprise loss on account of high input and transportation costs. Then it was Walmart (WMT), Target (TGT), Under Armour (UAA) and Ross Stores (ROST) with most of them posting double digit losses after margin compression and disappointing forecasts. The only large retailers that appeared to buck the trend were Costco (COST), BJ’s Wholesale Club (BJ) and The TJX Companies (TJX).

TJX reported flat same store sales (SSS) growth driven by a big drop in its Home Goods division, expects 1% to 2% SSS growth for fiscal 2023 and actually increased its adjusted pretax margin forecast to 9.6% and 9.8%. Unfortunately the stocks of these wholesale and discount retailers also dropped in sympathy with the broader retail sector as you can see from the Finviz one week performance heat map. The next shoe to drop is likely the home improvement focused retailers as housing softens. These big drops have triggered a large number of stock buyback announcements as well as insider purchases and we will be diving into those insider purchases this weekend to see if anything interesting surfaces.

Consumer Defensive Heat Map Finviz

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Voluntary Disclosure: I hold a long position in Twitter (TWTR).

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