Betting on Retail Stocks? Umnnnhhh.....

In the near-term (through at least the first half of '23, probably through all of '24), retail stocks are not really where you want to be.

...There could be an increase in distressed retailers beginning later this year, experts say, as ballooning prices dent demand for certain goods, stores contend with bloated inventory levels and a potential recession looms.

[…] The latest retail sales data shows where consumers are pulling back the most. Advance retail and food service spending fell 0.3% in May versus the prior month, the Commerce Department reported last week. Furniture and home furnishings retailers, electronics and appliances stores, and health- and personal-care chains all saw month-over-month declines....--CNBC quoted at Last Refuge

Not only that, but there is noticeably less foot-traffic in retail stores, meaning 'impulse buys' are not happening as often.

As a result of BidenFlation in food and fuel prices, customers bought six percent less items in the last quarter compared to '21.  We had mentioned that a major Midwestern car dealership (50++ outlets) took a THIRTY percent reduction in units sold y/o/y, too--but unlike Target, Kohl's, Abercrombie, and Wally-World, car-dealer margins are up and are likely to remain high.

For 'regular' retailers:  not so much,.

...Rising inventory levels are also on bankruptcy advisors’ radar because they have the potential to lead to much bigger problems. Retailers from Gap to Abercrombie & Fitch to Kohl’s have said in recent weeks that they have too much stuff after shipments arrived late and consumers abruptly changed what they were shopping for.

Target said earlier this month that it’s planning markdowns and canceling some orders to try to get rid of unwanted merchandise. As other retailers follow suit, profits are going to contract in the near term, said Joseph Malfitano, founder of turnaround and restructuring firm Malfitano Partners.

And when a retailer’s profit margins shrink as its inventories are reappraised — a routine practice in the industry — those inventories won’t be worth as much, Malfitano explained. A company’s borrowing base could fall as a result, he said....

But but but Biden got 81 million votes!

Uh-huh.