There are 11 days until Christmas, when retailers' super-sized promotions become armor in the war for market share. Investors should not be distracted by the frenzy, says president of S.W. Retail Advisors, Stacey Widlitz.
Black Friday sales, which increased 6 percent versus last year, are numbers to take lightly, she says.
"Retailers were overly aggressive, and it drove in traffic, but guess what — now that is going to come home and hurt margins," says Widlitz.
For Best Buy , black friday was very strong, helping the company to beat fourth quarter earning's estimates. But week's later, Widlitz points out that the company's gross margin — the proportion of each dollar of revenue that the company retains — is down over 1 percent domestically.
"The store is becoming a showroom. Amazon is eating their lunch, they're in a really tough position," she adds.
How should the investor react?
"Stay where the momentum is in retail," said Widlitz. Momentum in this case means sizable gains in revenue occurring over a month, rather than just a weekend.
For these companies, November was a great month, and landing them on Widlitz's recommended wishlist: Macy's , Limited , Wal-Mart and Saks .
Other retailers weren't so lucky. "Gear away from JCPenney and Gap turnaround stories. With those, you should wait and see," said Widlitz.
The American consumer purchases a third of their gifts in the last week before Christmas, Widlitz warns, so holiday discounts may yet pop stocks this year.
"We're going to see retailers really struggle for market share. There will be good deals to be had in the days ahead."
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Disclosures:
Stacey Widlitz does not personally own shares of the companies she recommends.
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