Grappling with big problems resulting in troubled stocks, these companies are a hard pass
American consumers keep on spending.
Retail sales throughout the U.S. continue to surprise to the upside. The most recent data from the Commerce Department shows retail sales rose 0.6% in December. This beat economists’ expectations for the holiday shopping season. Recently, some companies have come forward to report holiday sales were better than expected. They were fueled by stronger-than-expected spending from consumers.
While the continued spending has benefitted many companies and their shareholders, not every retailer is succeeding in the current environment. Plenty of retail stocks are languishing. Problems include slumping sales, bloated inventories, declining market share, and bad management.
Let’s delve into three consumer stocks to sell in January before they crash and burn your portfolio.
The Gap (GPS)
The Gap’s (NYSE:GPS) stock has recently enjoyed a nice rally. The clothing retailer reported its Q3 2023 results in mid-November. Following the print, GPS stock rallied 50% in about six weeks.
But don’t be fooled. The bull run looks to be exhausted now. And The Gap’s stock is sliding lower once again, having fallen 7% so far in 2024. With the economy cooling and the holiday shopping season behind us, GPS earnings can be expected to struggle going forward.
Further, signs are pointing to trouble ahead at the retailer. Despite beating Q3 earnings estimates, the company gave a cautious outlook for the year-end holiday quarter, predicting flat sales. Much of the rally in GPS stock over the past two months was also due to high expectations for new CEO Richard Dickson. He is credited with reviving the Barbie franchise during his time at Mattel (NASDAQ:MAT). But Dickson will be powerless against the economy if it falls into a recession this year.
Its meme stock status aside, continue to be weary of GameStop (NYSE:GME).
For one, the company continues to post poor financial results that miss Wall Street targets. Second, investor Ryan Cohen continues to assert more control at the troubled company. GME focuses on retail sales of video games in an age of digital downloads. Cohen became GameStop’s new CEO last September and is also the current board chair.
Third, the company continues to come up with strange new turnaround strategies. Most of those have nothing to do with selling video games. The latest idea allows Cohen to invest $1.20 billion of cash on hand in stocks and other investment vehicles. Some of those are cryptocurrencies.
Here’s hoping the market holds up this year. GME stock continues to be extremely volatile and is down 36% over the last 12 months.
Even Tiger Woods doesn’t want anything to do with Nike (NYSE:NKE) anymore. The legendary golfer recently announced that he is parting ways with the athletic apparel company. He’s saying farewell after 27 years and about half a billion dollars in endorsement fees.
Many shareholders wish they too could split from Nike given the poor performance of the company’s stock. Over the past 12 months, NKE stock has declined 22%. And that includes a 6% pullback in the first few weeks of 2024.
The company’s shares really began to sink after third-quarter financial results were issued just before Christmas. In fact, NKE stock fell 10% immediately after the sneaker maker reported mixed Q3 numbers. Shareholders and analysts took exception to the fact that Nike now forecasts full-year revenue to grow 1%, compared to a prior outlook of mid-single digit growth. Also, the company unveiled plans to cut its costs by $2 billion over the next three years, mostly through staff layoffs.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.