(Repeats column initially published late Friday)
By Caroline Valetkevitch
NEW YORK, June 20 Shares of specialty retailers
and apparel makers helped lead the charge off the market's
bottom in March 2009 but unraveled this year, leaving consumer
discretionary stocks as the sole sector to still be lower
through the first half of 2014.
Whether these stocks can snap out of that slump may hinge on
what a clutch of high-profile names in the sector has to say
about the health of consumer spending this week.
The S&P 500 consumer discretionary sector index is
down 1.1 percent since the end of 2013, the worst performance of
any of the 10 macro sectors so far this year, while the
benchmark index is up 6.2 percent.
Profit estimates for the sector have deteriorated as well,
shrinking by the most of any sector other than materials since
Jan. 1. Earnings are now expected to have risen just 8.7 percent
for the year, compared with 13.5 percent at the start of the
year, Thomson Reuters data showed.
As profit estimates have fallen faster than stock prices in
the sector, price-to-earnings multiples have shot higher, making
the group the priciest in the S&P 500 at 18.6 times estimated
This week brings results from a couple of the bull market's
big performers: Bed Bath and Beyond on the retail front
and Nike in sports apparel. Investors will also see
earnings this week from Carnival, which has not
performed quite as well.
"It's one of the sectors that has really had a lot of the
froth burnt out of it," said Quincy Krosby, market strategist at
Prudential Financial, which is based in Newark, New Jersey.
"Worries over the strength of the consumer, particularly in the
lower end and middle, is ... reflected in the shares."
With turmoil in Iraq and rising oil prices, fuel costs
during the U.S. summer travel season may be chief among those
concerns, she said. That makes companies' third-quarter
Bed Bath and Beyond is down 25.2 percent for the year,
while Nike is down 4.5 percent and Carnival is down 2.6 percent.
Other signs of trouble have come from consumer discretionary
More S&P 500 consumer discretionary companies have warned on
the second quarter than any other sector, with 22 negative
outlooks - including ones from Bed Bath and Beyond and Carnival
- and zero positive ones, Thomson Reuters data showed.
Last week, Coach 's shares tumbled on Thursday when
it forecast during an investor day presentation that revenue
will fall by low double digits in percentage terms for the year
ending June 2015. The stock fell 11.8 percent last week.
"They managed to significantly exceed to the downside an
already low bar," said Michael James, managing director of
equity trading at Wedbush Securities in Los Angeles.
"It's not as if everything in retail is a disaster, but from
a stocks standpoint, it would be smarter to underweight
positions in retail."
Further clues on the consumer front may come from economic
data, with reports on consumption and consumer confidence also
due this week.
U.S. consumer spending is expected to have rebounded 0.4
percent in May after dipping 0.1 percent in April, a Thomson
Reuters poll showed. The U.S. Consumer Confidence Index is
expected to edge up to 83.5 in June from 83 in May.
(Reporting by Caroline Valetkevitch; Editing by Jan Paschal)