As the quarterly earnings season winds down and several big-box retailers are set to report this week, one portfolio manager is cautioning some investors who may look to beaten-down brick-and-mortar retail stocks as a value play.
Particularly for some clothing and accessories names, this year has been a struggle, said Erin Gibbs, portfolio manager at S&P Global. She is expecting a mere 8 percent earnings growth for the group next year, which strikes her as concerning especially when the e-commerce space is booming.
"They're facing some tougher [year-over-year comparisons] and next year might also be another tough year for retailers. This is one of those areas where you could get into a value trap; some of these retailers really are trading at discounts, but that's because we're expecting lower earnings," Gibbs said Wednesday on CNBC's "Trading Nation. "
"You really need to be selective, with strong management, and ideally some more hope for growth expectations and revenue expectations going forward."
This week names like Nordstrom, Macy's, Kohl's and JCPenny are set to report quarterly earnings. Thus far, results this earnings season have been pretty "dismal," Gibbs said, with 62 percent of retail companies missing estimates, compared with only a 20 percent miss rate for all the names in the S&P 500 this earnings season.
Gibbs is hoping, overall, that some of the retailers meet or beat expectations. Meanwhile, "Amazon and internet retailing is the only area within retail that's doing well. " Some of the smaller-cap retail companies are indeed doing well, like Ulta, "one of Wall Street's favorites," she said. Some others like Home Depot and Lowe's are also holding up well.
Next week, some big retail names like Wal-Mart, Home Depot, Target and Coach are scheduled to report their quarterly earnings.
Disclosure: Gibbs manages a portfolio in which AMZN is a holding, but she has no personal or family ownership. It could not be immediately ascertained if Gibbs has a position in ULTA.