Usually, the winter season brings lightness to people as the holidays approach, but the cold economic nature of this year raises the uncomfortable topic of retail inventory for sale. Basically, Federal Reserve Chairman Jerome Powell has indicated that his top priority is control inflation. Moreover, Powell stood his ground, with the central bank raise the benchmark interest rate.
Going forward, it is not so much the rise in rates itself (up 0.75%) that counts. Instead, it’s all about intentions. Essentially, the Fed will do whatever it takes to get inflation under control. If that means constantly increasing rates until the goal is reached, that is what will happen. Naturally, inventory for sale has become a hot topic – and not just for the retail segment.
However, retail attracts a disproportionate share of the negative spotlight because people can always cut back on discretionary spending. Therefore, investors will want to be very careful about the following stocks to sell.
|BBBY||Bed bath and beyond||$6.72|
An iconic American manufacturer of sports apparel and equipment, Nike (NYSE:NKE) saw a substantial rally after the springtime slump of 2020. However, stocks peaked in November 2021, coincidentally at the same time the cryptocurrency sector hit a wall. No, neither NKE nor digital assets have much to do with each other. However, with the disappearance of risk sentiment, Nike fell, as did cryptos.
Investors don’t need to dig much to see why some people see the clothing giant as one of the stocks to sell. Year-to-date (YTD) through Sept. 22, shares are down 40%. Additionally, the short-term momentum does not bode well for NKE, plunging 11% in the prior month.
Financially, the company fourth quarter 2022 earnings report presented some warning signs. Revenue was $12.2 billion, about 1% lower than a year ago. This performance may reflect the fact that consumer sentiment for discretionary items (like sportswear) has peaked.
Nike’s sworn rival Adidas (OTCMKTS:ADDYY) doesn’t do much better, suggesting that investors should consider it one of the stocks to sell. It’s an uncomfortable topic, but all you have to do is look at the charts. Since the beginning of this year, ADDYY has fallen by 55%. Over the past month, we are looking at a loss of 15%.
Fundamentally, Adidas is dealing with the challenges associated with the pandemic lockdown paradigm shift. As the Washington Post once declared during the initial onslaught of the coronavirus, the company suffered a pajama moment. Now it’s time to get back to work – to the office. As Fortune said, senior management is currently winning the battle for the return to power.
Similar to Nike, Adidas appears to be suffering from revenue spikes associated with pandemic-fueled catalysts. In the latest issue of the company quarterly report, Adidas for the three months ended June 2022 generated revenue of $5.92 billion. This is a decline of 3.3% year-over-year (YOY).
Burlington (NYSE:BURL), which formerly operated as Burlington Coat Factory, is an American national discount department store retailer. Basically, you might imagine that these retailers could perform well during inflationary cycles. Those looking for a reduction in the erosion of purchasing power are encouraged to seek non-price solutions.
However, the market, unfortunately, did not receive the memo. BURL shares have slid more than 57% since the start of the year. Worse still, the shorter-term picture leaves no room for contrarian encouragement. Over the past month, BURL has lost almost 23% of its market value. This performance aligns with other retail-related stocks for sale.
As with the two sportswear giants above, Burlington could suffer from a revenue spike. In the quarter ended July 2022, the discount clothing retailer generated $1.99 billion in revenue. This figure is down more than 10% from the level a year ago. While the Fed’s Jerome Powell has acknowledged that the pivot to hawkish monetary policy can give a hard landingit is better to stay away from a company with reduced sales prospects.
Similar to other retail segment inventory for sale in the clothing space, Difference (NYSE:GPS) lacks credibility. Basically the problem stems from a redundancy issue. With so many public and private companies offering high-end fashion, it’s hard to compete. Add the economic challenges and vagaries and you have a difficult situation for Gap stakeholders.
Here, it is the market that speaks the most. Since the January open, GPS shares have fallen almost 52%. On a monthly basis, GPS has declined by more than 12%. Unfortunately, it’s not a great look. Moreover, Gap did not Fintelthe list of the most heavily shorted securities. Awkwardly, then, the GPS is bad, but not bad enough to be good – if that makes sense.
The other factor that makes Gap one of the stocks to sell is financial performance. For the quarter ended July 2022, the apparel retailer generated $3.86 billion in revenue. This figure is 8.4% lower than the prior year period. Unfortunately, it looks like the company has run out of fuel post-Covid-19, making GPS one of the stocks to sell ahead of the holiday season.
Ross Stores (ROST)
With Ross Stores (NASDAQ:ROST), I can go both ways. It is true that on a YTD basis, ROST has fallen over 23% of its market value. While I don’t want to engage in stock-level speculation, Ross is performing better on a comparative basis than other stocks for sale.
Moreover, the fundamentals of the company present an attractive profile. Since many company employees are potentially returning to the office, they may need to update their wardrobes. But with the economic booms, these folks may prefer low-cost retailers.
Nonetheless, Ross Stores isn’t exactly a shining star. During the past six months ended in July 2022, the company posted revenue approximately $8.92 billion. In the prior year cycle, Ross reported sales of $9.32 billion, reflecting a decline of approximately 4%.
In other words, like other stocks for sale, Ross appears to have seen peak earnings. Additionally, net income for the quarter ended July 2022 suffered a 22% decline. It’s just not in its best shape before the holidays.
VF Corp (VFC)
A global apparel and footwear company, V.F. Corp. (NYSE:VFC) may seem like a daunting idea for selling stocks. This is mainly because the company offers brands like Jansport and The North Face. Both are aimed at winter sports and, by logical deduction, at a more affluent clientele. Winter sports simply require more equipment than, say, kicking a soccer ball.
Indeed, VF Corp outperforms financially many other stocks for sale in the broader apparel segment. For the quarter ending June 2022 (actually July 2 if you want to be specific), VF had revenue of $2.26 billion. This represents an increase of over 3% over the prior year quarter.
However, the company’s operating profit in the last quarter was $63 million. In stark contrast, a year prior, VF had reported an operating profit of $203 million. To me, this is a warning sign that even the wealthy may be tightening their wallets.
Bed Bath and Beyond (BBBY)
A retailer of various household items, Bed bath and beyond (NASDAQ:BBBY) represents a controversial idea among stocks for sale. Previously, BBBY had attracted attention as a possible meme-swapping opportunity. However, this concept has collapsed.
It’s hard to know where to start with the struggling retailer. In August, there was a lot of talk about activist investor Ryan Cohen offering BBBY call options. Shortly after the reveal, however, Cohen sold sharescratering the market value of the company.
End of August, Bed Bath & Beyond filed to sell shares to raise funds. Of course, the metric represents dilution and, unsurprisingly, BBBY cratered again. Shortly thereafter, the company’s financial director deceased in difficult circumstances.
I can mention that BBBY stock is down 53% for the year. I can also mention the financial performance, which is mediocre and deteriorating. But then, I would just stack up at that time. It’s not a technical term but BBBY has bad juju all over it. I wouldn’t buy it, I wouldn’t short it, I would just stay away.
As of the date of publication, Josh Enomoto had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.