The Holiday Season Has Been Kind To Discount Retailers, Not So Much Toward Department Stores

The holiday shopping season is off to a really good start for discount retailers. For department stores, however, the season is shaping up differently.

“If you take a look at where we are and what we’ve seen thus far, off-price [...] have all done considerably well; a heck of a lot better than anyone else,” said Ryan Craver, senior vice president of emerging brands and digital for Lamour Group. “They’ve posted anywhere from a 3–7 percent year over year sales comp increase,” he said, referring to Burlington Stores Inc BURL, Ross Stores, Inc. ROST and TJX Companies Inc TJX.

Craver, a retail industry expert, offered his analysis of the space on Monday’s edition of PreMarket Prep.

Discount Vs. Department Retailers

In addition to the strength in discounters, Craver is seeing some headwinds in big-box department stores.

“You’ve got the department stores, and none of them have posted a good [comparable sales],” he said, noting only Nordstrom, Inc. JWN has seen positive sales data so far this holiday season.

Other traditional retailers like Kohl's CorporationKSS, Macy's Inc M, J C Penney Company Inc JCP and Dillard's, Inc. DDS have struggled.

While off-price, brick-and-mortar stores are taking a chunk out of department store’s sales, Craver observed that a survey of online purchases made Black Friday weekend were made on Amazon.com, Inc. AMZN, making it the undisputed “beast” of the industry.

“And if you look at the actual growth, I estimate it’s anywhere from 50–60 percent of the growth in certain categories is going to Amazon. It’s not going to stores.”

Surprises

Best Buy Co Inc BBY’s rebound is a surprise to Craver, at least so far this holiday season.

“They have done a good job at fighting Amazon off,” Craver said. “They’ve continued to do relatively well in comp expectations. They are still profitable; they’ve done a lot of stuff in stores that keeps people coming in to try their experiences, whether it’s Samsung or Apple Inc. AAPL or some of the more premium entertainment centers.”

However, Craver thinks the market may be pricing a little too much optimism into the industry.

Too Much Optimism?

“Q4 is going to be a big, big deal for many of these retailers,” Craver said. “Specifically for the electronic retailers. I think a lot of optimism is built into a big Q4 and it might not meet the expectations.”

Listen to the full discussion at 32:52 in the clip below.

PreMarket Prep is a daily trading ideas show that focuses on technical analysis and actionable short term trades. You can listen to the show live every morning from 8–9 ET here, or catch the podcast here.