Retail sales from last week were favorable for a handful of retailers, with robust August growth. The largest gain for the department store chains came from Nordstrom Inc. (NYSE: JWN), which saw sales at stores open at least a year increase by +6.3%, and Macy’s (NYSE: M) saw a +4.3% increase in August.
Unfortunately, however, weak consumer spending continues to weigh on many retail stocks. The bottom line is that as long as unemployment continues to drag down the economy, most retail investments are going to have trouble making headway.
Here are six retail stocks you should dump now to protect your portfolio:
Luxottica Group (LUX)
Based in Italy, Luxottica Group (NYSE: LUX) is engaged in the design, manufacture and distribution of prescription frames and sunglasses. Its glasses are offered in a variety of eyeglass retailers, including LensCrafters, Sunglass Hut, Pearle Vision, Target Optical and Sears Optical. Since January, LUX stock has dropped -7.2%, compared to marginal losses by the broader markets. The fact that analysts have scaled back earnings estimate to $0.28 this quarter from $0.40 last quarter does not have shareholders thrilled either. With a current stock price of just $23.83, this retail stock is trading just above its 52-week low of $22.12.
Lowe’s Companies Inc. (LOW)
Lowe’s Companies Inc. (NYSE: LOW) is one of the most popular home improvement superstores in the U.S. At the end of January, Lowe’s officially had 1,710 stores operating in the United States and Canada. Despite the large amount of brick and mortar stores, Lowe’s stock has been underperforming on the year. Over the last nine months, shareholders have watched Lowe’s stock fall -7.5%. The home improvement retailer missed earnings estimates by a cent last quarter, and experts have set estimates at $0.30 for next quarter, down from earnings of $0.58 last quarter.
Best Buy Co., Inc. (BBY)
Best Buy Co., Inc. (NYSE: BBY) is known as an international retailer of consumer electronics, entertainment software, appliances and home office products. Recently however, Best Buy has been known for poor stock performance. The retail giant has watched its stock decline -14% in 2010. Additionally, Best Buy missed its earnings estimate by -28% last quarter causing analysts to lower their estimate this quarter to $0.46 from $0.50 last quarter. A net profit margin of just 1.7% isn’t much of a bright spot for company officials either. Best Buy will be releasing its earnings report next week, and time will tell if the electronics retailer continues to skid.
Staples Inc. (SPLS)
Office supplies producer Staples Inc. (NASDAQ: SPLS) is another large retail stock struggling as of late. Staples offers its product to consumers in 25 countries in North America, South America, Europe, Asia and Australia. Since January, the stock has dropped -27.8%, compared to small losses by the broader markets. Staples saw a small spike in stock price when it met earnings estimates several weeks ago, but the surge was short lived as Staples is once again trading near its 52-week low of $17.45, with a current stock price of $18.77. Experts have doubled their earnings estimates from last quarter, and it will be interesting to see if Staples can reach its lofty goals despite poor consumer spending and the end of “back-to-school” season.
Gap Inc. (GPS)
Gap Inc. (NYSE: GPS) has become an iconic brand in the American retail industry for its clothing, accessories and personal care products. The retailer is also known for owning Old Navy, Banana Republic, Piperlime and Athleta brands. Despite being a household name, Gap has performed very poorly in 2010, as it has seen a stock decrease of -18.4% over the past nine months. Gap was not helped by the fact that its same-store sales remained flat during August, according to its latest earnings report. Over the pasr 52 weeks, Gap’s stock has slid -18.7%.
Kohl’s Corp. (KSS)
Kohl’s Corp. (NYSE: KSS) operates over 1,000 family oriented department stores across the U.S. Among Kohl’s products are: apparel, footwear, home products and house wares. Despite its diverse line of products, Kohl’s has continually underperformed throughout 2010. Since January the retail stock has decreased -9.1%, and it has dropped -10.2% over the past 12 months. Experts have reduced earnings estimates to $0.63 for this quarter after Kohl’s posted earnings of $0.84 last quarter. Clearly, the analysts are not confident in the department retailer’s performance history.
As of this writing, Louis Navellier did not own a position in any of the stocks named here.
5 Small Caps with 10-Bagger Potential. Small, innovative companies are watching their earnings explode — and they are the next ten-baggers. Investing pro Louis Navellier reveals his secrets to identifying these small cap innovators, plus five of his favorite small cap stocks — download your FREE profit guide here.
