I’m sure I wasn’t the only person in the industry to raise an eyebrow when the S&P Retail Index notched an all-time high last month. Closing at $669.26 on Sept.14 to reach that milestone, the index has continued to creep up even further the last couple of weeks. A closer look at the stock market performance of the retail sector shows that both REITs and many individual retailers are continuing a strong positive trend—which makes sense, of course, because REITs will perform better in a strong retail environment when retailers are doing well.
While the headlines continue to be positive, the bottom lines are still a bit mixed. A number of strong, innovative brands have seen their stocks rise to all-time highs, but some have missed the boat at a rather inopportune time. In particular, traditional teen retailers like Aeropostale and Abercrombie & Fitch continue to struggle. But, as we all know, down doesn’t always mean out in this industry. Some retailers that have struggled in the past have come roaring back. Think Limited Brands.
All of this gets me thinking about what makes that key difference between success and failure; where, how and why do we draw the line between “buy” and “sell?” There’s no one single answer, of course, as it depends on a number of complex factors. There isn’t always a correlation between specific industry performance and retailer strength: Electronics is going like gangbusters these days, but Best Buy is still limping along. In the case of fashion retailers, especially teen fashion retailers, the fickle nature of the consumer often has a huge impact on performance.
Something else that I’ve been thinking about is how this new-found stock market strength could impact retail expansion plans. I think these strong numbers from retail stocks might indicate that retailers will be loosening up the purse strings a little bit and taking a more aggressive approach with their expansion plans. Obviously, this isn’t exactly a brand new development. Keeping in mind there’s always a lag time between making a big-picture expansion plan and actually executing one, the strength we’re seeing from stocks now will have more of an impact on 2014 expansions than it will on 2013 plans. Those deals are already done and leases are signed.
In my mind, the bigger question is, “Will this stock strength continue?&rd