The latest round of corporate earnings has put a spotlight on the retail sector, with shares of Target (TGT) today falling on the company's disappointing outlook for the holiday season. More names from this group are gearing up to release quarterly results in the days ahead, including Foot Locker (FL) and Abercrombie & Fitch (ANF). And according to data from Schaeffer's Senior Quantitative Analyst Rocky White, the retail sector could badly use a pick-me-up. Below, we'll take a quick look at the SPDR S&P Retail ETF (XRT) and sector components Dollar Tree, Inc. (NASDAQ:DLTR) and Nordstrom, Inc. (NYSE:JWN).
But first looking at White's data, it shows only 43% of the stocks under our "retailing" umbrella are trading above the 80-day moving average and on average they're down 2% over the past year. Short sellers have been betting on more losses, too, evidenced by a roughly 24% increase in short interest over the past year.
Two names that could buck this trend are Dollar Tree and Nordstrom. That's because White's data shows they've historically outperformed during Thanksgiving week, with DLTR averaging a gain of 5.9% for the week, tied for the best of any S&P 500 Index (SPX) stock. The shares have ended the week higher nine of the past 10 years.
As for JWN, the security has ended the week in positive territory 80% of the time over the past 10 years. Like its sector peer it has averaged a 5.9% rise for the period.
Dollar Tree enters the week with much more momentum than JWN, bouncing from the $66 area back in July to rally hard to its current perch of $93.47, touching an all-time high of $95.64 on Nov. 10. Whether it can repeat history and extend its run higher will likely depend on the company's earnings results, which are scheduled to be released before the open Tuesday, Nov. 14.
Unlike the broader sector, short interest has mostly been declining on DLTR stock for months, and now accounts for just 2.2% of the equity's float. But short-term options traders are unusually put-skewed, based on the Schaeffer's put/call open interest ratio (SOIR) of 1.32, ranking in the 91st annual percentile. An unwinding of these positions after earnings could result in tailwinds.
Checking in on Nordstrom's technical position, the stock has been pressuring lowered in recent weeks by a weak earnings report as well as the 20-day moving average. The shares have shed almost one-third of their value over the past year and hit an annual low of $37.79 on Nov. 8, last seen at $39.41.
But short sellers are throwing in the towel on JWN, too. During the last two reporting periods short interest fell by close to 11%, but over 17% of the equity's float is still dedicated to these bearish bets, suggesting there's plenty of room for this short-covering trend to continue -- a potentially bullish development.