Mall Stocks Need More Than Black Friday to Flourish


The retail sector is so beaten down that a few good numbers can move mall stocks

The mall had one job this week: prove to Wall Street that the world hasn’t ended for conventional brick-and-mortar retail. That’s all it took to push store stocks like Macy’s Inc (NYSE:M), Nordstrom, Inc. (NYSE:JWN) and Dillard’s, Inc. (NYSE:DDS) up 13%-21% since the doors opened on Black Friday.

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Source: Shutterstock, Inc. (NASDAQ:AMZN), meanwhile, has at best drifted down about 2% over the same timeframe. On that level, at least, the mall is “winning” the season … but the real question is what happens when the holidays are over.

One reason brick and mortar is rebounding so fast is that sentiment around retail was already so dismal that it didn’t take a lot of good news to bend the bear trend.

Think of it as the reverse of a stock with a sky-high valuation dropping like a rock when earnings miss by a fraction of a penny — the math to support the stock price has gotten so precarious that a tiny readjustment blows the entire house of cards down.

AMZN currently trades at a lofty 146X next year’s earnings estimate and is vulnerable to that kind of blowback. The mall stocks, on the other hand, were priced for the apocalypse, where those dynamics work the other way. When you’re a company like Macy’s priced at 9X forward earnings, even a little confidence in the status quo is all the vultures need.

The ray of light this season is as simple as it gets. People actually got in the car and went to the mall this weekend. Not everyone stayed home and bought all their holiday gifts online.

According to National Retail Federation surveys, brick and mortar played a role in 70% of all retail activity over the long weekend, which sounds healthy — until you consider that a decade ago that number would be close enough to 100% to squelch any controversy.

That’s not really a winning trend for anyone but AMZN and its spawn, although it’s clear that the chain stores are going to delay the day of reckoning at least one more year.

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