It’s been a tough month for discount retailers as many stocks in that group have been hit hard. After recently reporting earnings that didn’t support some of their stretched prices, we’ve seen drops of up to 20% in names such as Dollar General (DG) and 13% in Dollar Tree (DLTR). On the other hand, newer companies that provide a discount for anything ranging from retail to trips or events are flourishing.
Everyone loves a bargain. And for years after the slowdown in the economy, many Americans needed a bargain as the effects of increased unemployment and reduced spending took hold.
It was during this time that consumers embraced discount retailers where everyday household items could be purchased at a fraction of the cost elsewhere. Companies such as Dollar Tree Inc. and Dollar General saw their shares improve 600% and 325% respectively over the last 6 years. As mentioned, these same companies are getting hit hard this month and are breaking below key areas of support on volume.
On the flip side, mobile based discounters such as Groupon (GRPN) have seen gains of 50% over the past 3 months and Retail Me Not (Sale) is up 35% during that same period. These companies provide discounting to all sectors of the retail such as stores as well as restaurants and spas. Travel and event discounter Travelzoo (TZOO) is also up big - close to 50% over the last 6 months. All of these companies reported earnings that were well above analyst’s estimates.
Are these moves a continued embrace of all things mobile? To be fair, the brick and mortar discounters were priced for perfection while the more mobile-based discounters were oversold and due a pop on any kind of good news. Of the stocks mentioned above, not one of the charts currently looks interesting with retail discounters trading below support and the newer model discounters extended after their recent big moves.
Interestingly, there are two well established companies that are also geared toward bargain hunters that are currently still going strong. I’m talking about Amazon (AMZN) and Ebay (EBAY) which both have charts that could be bought.
One Of Many Discount Retailers That Got Hit Hard This Earnings Season:
Example of mobile alert provider for travel discounts:
Company That Initiated Discount Online Shopping Is Still Going Strong:
Mary Ellen McGonagle
President
MEM Investment Research
