This time of year it would be easy for investors to start feeling rosier about retail stocks. After all, holiday sales are the best time of year for the stocks and it would be dangerously easy to think these shares might have turned the corner because of better holiday sales. However, the key to choosing these names is to understand “bifurcation”, according to Cowen research. That bifurcation is that broadline retailers like Target and Walmart are doing well, while apparel-driven retailers like Kohl’s, Gap, and Macy’s are not. For example, Target and Walmart are up 88% and 27% respectively this year while Macy’s and Gap are down 49% and 33% respectively.
FINSUM: Momentum seems like a friend in the the retail space. We expect this bifurcation to keep going, especially as consumer purse strings are likely to be tighter this holiday season.