I haven’t been watching publicly traded apparel retailers carefully for years. For me, the issues/problems in picking winners in this area have been legion. There’s the generational shift in spending power from Baby Boomers to Millennials, the move from bricks-and-mortar to online, the lingering effects of recession on spending power and spending habits. And then, of course, there’s the normal movement of retailers in and out of fashion.
I’m not saying that retail isn’t worth following. I just find it too hard to find solid ground to build an investment thesis on. Maybe the pace of change is too rapid for me. Maybe I don’t have a good enough feel for how Millennials regard apparel–or whether retiring Boomers are using their accumulated inventories of fashion clothing rather than adding to them.
Having said that, I’m still surprised–shocked, actually–at how the current quarter for apparel retailers is playing out. It seems like every day a new retailer is reporting quarterly earnings that fall below management guidance, usually the latest in a string of sub-par quarters. That itself isn’t so unusual.
But the stocks react by plummeting.
You’d think that the market would have caught on that Retailland is facing structural headwinds. Or at least, that the retail area that made the careers of so many active managers over the past twenty or thirty years doesn’t exist any more.
Is it robot traders? Is it an effect of continuing buying by index funds? I don’t know. But the continuing inability of investors to factor into stock prices the continuing slump of apparel retailers is certainly odd.