Investors Place Bets as Grim Reaper Pays Retail A Surprise Holiday Visit

December 27, 2012 3:00 PM EST
With reports of weak holiday spending, short sellers have their eye on struggling retailers Best Buy (NYSE: BBY), J.C. Penny (NYSE: JCP), Radio Shack (NYSE: RSH), and Sears (Nasdaq: SHLD). While these stocks have been on death watch for some time, today's WSJ headline calling this holiday shopping season "do or die" did not help.

Each of the stocks mentioned above has had well publicized difficulties, ranging from old-fashioned brand images, questionable strategies, intense competition, and tight finances. Make-over plans aside, in the view of many on Wall Street these company's simply cannot hack it. With Christmas a bust, it might be just a matter of time before one or all of these companies receive a visit from the Grim Reaper, and investors are already placing bets.

On Thursday afternoon, shares of J.C. Penny and Radio Shack traded lower by 7 percent. Sears and Best Buy are faring better, but are still lower by 1.75 percent.

Interestingly, heading into the holiday, shares of J.C. Penny, for one, were higher on hopes of improvements in holiday spending. Those hopes were dashed yesterday when MasterCard's SpendingPulse unit showed shopping increased just 0.7 percent compared to last year, which is well below expectations.

However, all may not be lost. According to Gallup, an 11th hour surge in spending saved the holiday shopping season. Daily spending surged to $119 during the pre-Christmas weekend spanning Dec. 21-23, the best pre-Christmas showing since Gallup began tracking consumer spending in 2008. Investors are also struggling to understand the effects of an extended holiday shopping season and increased gift card giving, which could be offset by sour weather in the north.

So, despite fears, it might be a bit too early to throw in the towel on BBY, JCP, RSH, and SHLD, though it is certainly advisable to keep one handy.

Serious News for Serious Traders! Try Premium Free!

You May Also Be Interested In

Related Categories

Insiders' Blog, Retail Sales, Trader Talk

Add Your Comment