Market Overview

You Wanted Dillard's Because Of The Real Estate? Here It Is

You Wanted Dillard's Because Of The Real Estate? Here It Is

Retail stocks are getting the beats Thursday after three big-box retailers' second-quarter earnings.

Despite exceeding Wall Street's estimates for EPS and revenue, Macy's Inc (NYSE: M) and Kohl's Corporation (NYSE: KSS) are down 5 and 9 percent respectively despite initially popping on the news. Dillard's Inc. (NYSE: DDS), who missed on EPS and beat on revenue, is down 15 percent at time of writing.

On Thursday's PreMarket Prep, hosts Joel Elconin and Dennis Dick agreed this is not the time to buy the dip in retail.

"These retailers, these are OK numbers, they still cant catch a bid," Dick said. "There's no reason to own these things. They even reported OK quarters, it doesn't matter. The trend is not your friend."

Dick was surprised to see Kohl's initially pop on the news.

"Who's buying these things up $3? These are the retailers that everyone hates."

Dillard's As A Real-Estate Play? Not Quite

Dillard's got a nice pop at the end of July, when the stock was targeted by activist firm Snow Park Capital. The real estate-focused investors came out and said the stock is worth $200 on the value of its real estate alone.

But the stock is down 25 percent since its high of the move.

"Everybody in the whole world [was] saying 'Oh it's a real estate play. Oh this thing's awesome. $60–$85. Why would you not go and buy this hot stock?'" Dick said. "This is why. Here's your real estate play. Here we are 10 trading sessions later after everybody had to own it on July 31 ... it's down 13 points. What is this real estate really worth? If we're all going online, all this stuff isn't worth as much as you think it is."

"Well we know how well that real estate model has worked for Sears Holdings Corp (NYSE: SHLD)," Elconin noted.

"This started as a short squeeze guys," added Dick. "It was just a short squeeze technical breakout, and now you've given it all back."

$60 is a potential area of support, according to Elconin. However, he added, "I don't know if this would be the best day to initiate a long in the issue" due to the amount of air in the daily chart.

At Time of Publication

  • Dillard's shares were down 14.76 percent at $62.50.
  • Kohl's was down 7.06 percent at $38.99.
  • Macy's shares were down 9.39 percent at $20.85.

Listen to the full segment at 4:42 in the clip below.

PreMarket Prep is a daily trading show that airs from 8–9 a.m. ET every day here and on Benzinga's YouTube page. The podcast can be found on iTunes, SoundCloud and Stitcher

_________ Image Credit: By Zereshk - Own work, CC BY-SA 3.0, via Wikimedia Commons


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