Understanding the Diversity in Retail There are reasons why the retail sector must not be considered as one major overall entity, mainly because of the diversity involved.
TradeZero Ocean Place Cable Beach, Unit #1 Nassau, Bahamas
Advanced and efficient stock trading and investing requires a lot of in-depth thinking to look beyond the obvious. Here’s an example from retail stocks.
Some Retail Stocks Looking Optimistic Spanning a variety of sectors, retail stocks cover everything from traditional brick and mortar shops to online catalogs, making it one of the most diverse stock groups in the equity market. Analyzing this segment is quite challenging for beginners as well as experienced traders. Is the retail sector experiencing a recovery from its bad times? On Thursday, August 24, some retail stocks displayed optimistic performance, reporting before the market opened and trading higher after their earnings in the premarket. This was contrary to the wildest expectations. These stocks were Dollar Tree ($DLTR), Abercrombie and Fitch ($ANF), Signet Jewelers ($SIG) and Burlington Stores ($BURL).
Retail Sector Not One Large Entity But one Nasdaq analyst urges caution and tells not to presume that the overall collapse in the retail sector is over. This couldn’t
www.tradezero.co
+1.954.944.3885
yet indicate it’s time to add retail stocks to your portfolio. The analyst points out that such a kneejerk reaction could only be the result of the erroneous perception of the massive retail sector as one large entity. It’s too diverse to be considered that way. If the past few months are surveyed, there has been significant diversity in results and outlooks. JC Penney ($JCP) and Macy’s ($M) are two of these major department stores whose struggles have been significant. The problems were building up for some time though, and were mainly caused by people turning to online retail which is doing really well mainly on account of Amazon ($AMZN) and other ecommerce businesses. So what’s clear here is that each business in the retail sector is unique and different; and the sub-sectors have varying results too.
Diversity in Retail It’s important to remember these points since, though they may be obvious facts, when considering retail as a whole the diversity of the various retail stocks and sub-categories are forgotten. One look at the SPDR Retail Sector ETF ($XRT) can give a picture of the diversity in the retail sector, with companies
www.tradezero.co
+1.954.944.3885
Such as Priceline ($PCLN) and Netflix ($NFLX) also included along with Amazon. It’s not always accurate to classify retailers as online retailers and brick and mortar ones since almost every retailer has a presence online. Even the conventional categorizations have failed. It would be better to classify the retail businesses as traditional and non-traditional ones. It has been observed that even when the traditional retail sector witnessed growing problems, the nontraditional retail stocks continued to flourish. So make sure you don’t make any decisions by looking at retail as a whole, but rather by assessing the individual stocks and segments.
www.tradezero.co
+1.954.944.3885