Pockets of the retail sector underperformed on Tuesday ahead of a wave of earnings reports that will pour in over the next few weeks.
Off-price retailers Ross Stores ( ROST ) -2.15% , TJX Companies ( TJX ) -1.79% , and Burlington Stores ( BURL ) -2.14% , and Big Lots ( BIG ) -0.98% were all notably lower.
Discounters Dollar Tree ( DLTR ) -1.11% and Dollar General ( DG ) -0.85% were also in negative territory.
General merchandise giants Walmart ( WMT ) -0.45% , Target ( TGT ) -0.22% , and Costco ( COST ) -0.73% also traded below broad market indexes. Walmart and Target are expected to post their holiday quarter earnings report during the last week of the month, while Costco is anticipated to report in early March. In general, full-year guidance from the retail royalty is expected to be cautious.
The early from the National Retain Federation on holiday sales was that inflation and high interest rates hampered results with the +5.3% year-over-year tally considered a disappointment. "We knew it could be touch-and-go for final holiday sales given early shopping in October that likely pulled some sales forward plus price pressures and cold, stormy weather," noted NRF Chief Economist Jack Kleinhenz said. "The pace of spending was choppy, and consumers may have pulled back more than we had hoped, but these numbers show that they navigated a challenging, inflation-driven environment reasonably well," he added.
Looking at the retail sector setup for the year ahead, Wells Fargo thinks inventory issues need to inflect in 2023 and margin visibility is still spotty due to the macroeconomic backdrop.
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Retail sector dips as earnings jitters for holiday quarter come into play