After a stellar earnings report, with a surprising 1.3 percent gain in same store sales, Target shares are up only 3 percent today, after dropping 23 percent for the year.
Huh? Target not only beat expectations, it raised full-year numbers by nearly 10 percent. But the stock is up a measly 3 percent. That tells you that the investing public is not that impressed.
But there's no significant rally in retail. Target trades at $56; it started the year around $73.
Yesterday there were dozens of retailer stocks trading at 52-week lows, including JC Penney, Buckle, Bed Bath & Beyond, Mattel, L Brands, Under Armour, Penske Automotive, Hibbert Sports, Cato, Express, Francesca's Holdings, DSW, and even retail REITS like Tanger Factory Outlets.
Absent some sudden mass rush to the stores, it's unlikely we will see a notable rally in retail until the fall, if at all. The reason: retailers are facing "revenue cliffs" and margin compression this year and it's not clear to investors where the bottom is.
You can see this with Target, which after reporting $73.7 billion in revenue in 2016 is expected to report revenue of $69.4 billion this year, a decline of nearly 6 percent.
It's the same story with most other retailers, but particularly department stores, all of which are looking at mid-single digit declines in revenue.