This is the Value Investor podcast with Tracy Rinek, All Things Value All the Time. Welcome back, Value Investors. So I wanted to take a look at one of the key industries this week that does have a lot of value stocks or seemingly value stocks in it, and that is the retail stocks. Now this is a big category, and when I was going in to try to screen for the retail stocks, it only indicated, again to me, how big of a category this is.
There's a lot of things that are incorporated into quote-unquote retail, and it can range from what we all consider to be the basic retail stocks, like a Walmart, a Costco, a Target, and then department stores, and then specialty retailers like Abercrombie and Fitch. Then you have the beauty side, like a Sephora and Ulta. Then you also have a shoes, you could have furniture, and also in this category I've discovered. This is a sector on sex.com.
It's retail slash wholesale, and these can include the auto retailers like Alithia or Asperi or Penske because that is a retailer, just selling cars. It could also include somebody like Expedia. They were included in this list. They're a little bit, that's like an online travel company, and where do you put that in the bigger sector categories?
Not industry, but sectors. They are selling travel packages and whatnot. So it was stuck in there on sex.com. So you get an idea of how diverse this category really is.
So if you are screening and you're using the sectors and you're going to use this retail wholesale, just keep in mind that it's a little bit broader than what your own traditional retail may be. In that case, you might want to use the industries, but there's quite a few industries that are in the retail sector too. That's why I just used the sector because I felt like this was a bigger grouping, but it might leave out some of the bigger types of retailers. You may find that a retailer like a Walmart that is also a grocery store may not be in retail wholesale, but may be in a category like consumer staples or consumer discretionary, which are their own sectors.
So that's why it gets a little tricky to screen this way. But it's good enough for this particular exercise because when I ran a screen using retail wholesale, I did get plenty of what we consider to be a run of the mill retailers for this screen. So I stuck with it. Now this screen, I did do retail wholesale.
I looked for PE price to earnings ratios under 20 because I wanted to get a broad grouping. So I didn't do our usual 15 and under, which looks for real value or 10 and under, which is looks for dirt cheap on the PE ratio. I went with 20 again because I did want a little bit wider screen. Now I didn't have this X rank at first.
So I just went with the retailers PE under 20 and I got 96 stocks. That's a little bit too many for me. So then I decided to add the rank of one twos and threes because I didn't think there would be enough ones and twos. And I wanted it again to be a little bit wider.
We are in the middle of getting a bunch of these earnings reports in from the retailers and we haven't heard from all of them yet. So the rank is kind of wonky right now. Some of them definitely have fours and fives going on. And that is because these estimates already being cut even ahead of the earnings because of the tariffs, trade wars, actual, you know, they're cutting their guidance ahead of time like American Eagle did.
So you're automatically getting these cuts and just kind of looking around though, a lot of them are at threes kind of going into their numbers here. So not as many fours and fives as you might think, at least not yet until they're in. And then we'll see if more cuts are coming. Now remember the number threes are holds.
80% of all stocks are number threes. I did want to include it because of the chaos that's going on in the retail sector right now. So just taking a look at some of the industries. Some of these are in for the retail industries in the top, you know, 50% of all industries right now.
So that's interesting. But again, we haven't had a lot of earnings coming in on some of these names yet. So we will see. Okay, I ran it with just this basic screen.
Since twos and threes, PE under 20 retail wholesale as the sector. And I got 77 stocks. Now that's down from 96 before I added the rank. So that tells us right there how many are fours and fives, right?
Because I had no rank before. And now I just did one, twos and threes. So not as many as you might think, but and 77 still a lot of stocks, but I was able to scroll down, I ignored the auto retailers, I ignored Expedia, some of these types of names. And I picked out three stocks to take a look at today for the value or trap analysis because they showed up in the screen.
But I also wanted to look at two others. One, both are reporting this week. And when you hear this podcast, they will have reported whenever courting this podcast, we already got one of them in target. And then deckers, I wanted to cover as well because that PE is a little bit on the low side after it pulled back after the liberation day sell off.
But that is Hoka and Uggs. And what's going on there? Is there some value trappiness? We don't know.
And then they are going to be reporting this week as well. So the numbers I'm going to give you will change a little bit, but we can at least get an idea about what's going on there because they are one of the premier retailers and especially in shoes that's out there. So let's start with Levi. I'm not sure I covered it much here on the podcast, but they are in the jeans, obviously, and just a lot of apparel.
And they went public a couple of years ago, before the pandemic, and then they have been killing it on the earning side. They have not missed in the last five years. And that is dealing with everything that was going on in the pandemic. But the stock has been up and down.
And especially this year, it did also sell off in the Liberation Day sell off, but has rebounded a bit. So this company has already reported its next earnings is expected in June. So they're one of those kind of early reporters, I guess you can say. I think they're off here fiscally.
But Levi's ticker, L-E-V-I, $7 billion market cap. And remember to determine whether or not they are a value or a trap, you can't just look at the P-E, which is what we are going to look at initially. But we also have to look at those earnings to see what is going on there and if there's that trap component. So the forward P-E on Levi's right now is $14.5.
So that's cheap. That would even be considered a classic P-E ratio if we normally look under $15. So we've got some cheapness going on. It pays a dividend yielding $2.9.
So that's pretty nice dividend. They've been shareholder friendly. But looking forward to the earnings growth. Okay.
So that's what we need to look at for 2025 or this fiscal year to kind of see where we stand. So looking at those detailed estimates, we do have two that are lower in the last 60 days for this fiscal year. So that's coming off of the last earnings. But they are looking for $1.23.
They made $1.25 last year to estimates lower. So that's a decline of 1.6%. But what we're really looking at is what is the direction of those earnings. And right now they are a little weak here.
A rebound expected for fiscal 2026 up 10%. And we'll see to $1.35. So a little bit of trappiness going on here with the estimate cuts, not surprising given what's going on in the trade war and with the consumer spending a little bit slower than everybody expected. That's the trickiness with these retailers and which is why I wanted to look at them because a lot of them appear to be cheap.
But if we get a recession, they really aren't because those earnings are going to get hit even more than what they are right now. So this is a bad hit though. 123 versus 125. That's not terrible.
Revenue expected to be down 6.1%. Also, not real bad, but it is a decline. So I would put this one a little bit in the value trappy category. And at 14 times, it's not really that cheap for me.
If it was trading at 10 times here and I was getting this slight earnings reduction, then I might be a little more interested because I am getting it cheaper. But at 14 times, it's not that cheap to get no earnings growth this year and then maybe a rebound next year. So I would be on the sidelines with Levi here, but I'm not racing to sell it if I already owned it. And we've gotten this nice little rebound here in the last month off of those lows, which many stocks have gotten, but certainly these retailers have gotten it.
So I'm taking a look here just to kind of see what kind of rebound we've had, but it looks pretty nice on the charts. So Levi in the last month is up 18% and S&P 500 up 14.5. So that's a nice gain and beating the S&P 500, but it did have a big sell off leading into this. And year to date, we are just not even with the S&P 500.
It's up, but only just 0.6% at S&P up 0.2. So the most weakness is been in the last three months because that did include the Liberation Day sell off, which is now well past, we're well past it here in late May. And that is down about 6% and S&P down 3.5 in the last three months. So that is now going back into February.
Okay, so Levi's not looking terrible here. You know, a lot of panic and then it turned out not to be a panic situation, at least not yet. It's cheap, but not cheap enough for me with the slight little bit of a pullback in the earnings, but I'm keeping it on my watch list. That's Levi's L-E-V-I.
And then I wanted to look at another kind of apparel retailer might not be on your radar, but I've been watching this one Lance and so this stock is better on a roller coaster over the years up and down. It's kind of in trend and then it's not. And it's been a real hard stock to own, especially if you wanted to own it for like a long term play, but it's a little bit better for the more shorter term opportunities. So when there is a big sell off in the stock, then it does get cheap enough.
Maybe I might be interested because their collections recently have been a little bit more on point, but where are they manufacturing? How bad is the tariffs going to impact them? All of that is, again, of course, in play with a stock on the apparel side. And they also have, you know, they do have some shoes and accessories and things.
I'm not sure where they make that as well, but if it's made, you know, Vietnam, Cambodia, India, any of those countries where a lot of those types of items are made, then, you know, we could see, but a lot of those tariffs are on pause. We only have the 10% and then everything else is on pause. So one month, it has tried to recover, but not as much as what we saw with Levi. So it's still down 1.9% over the last month.
And then we do have the S&P 500 up about this is showing me 13% year to date. Let's see what's happening down 34% now. So it's kind of some of these small retailers where you could be finding some bargains, maybe, but is it a value or is it a trap here? So we're going to take a look at those detailed earnings estimates.
So PE is at 13.8. That is pretty low, but again, not as cheap as what I would like to see it. What was it at before it declined 34%. I don't know, because looking at the earnings, this fiscal year, fiscal 2026 expected to see earnings up 62% to 65 cents from 40 cents.
And then the following year to 86 cents from 65 cents, that's another gain of 31%. So none of this is showing any kind of value trap. Let's see what the analysts, there's one that is lowered in the last 60 days. And we're expecting the next earnings report also in June, like Levi.
So they did miss on the last earnings report in March. The shares did get hit and fell considerably since that last earnings report, but trying to find some stability. It is under $10 here trading at $8.71. This is an industry retail catalog shopping, just FYI for the industry, but it is in retail wholesale for the sector.
And so this is looking like an interesting play, like a true value here. And the shares are cheap. I don't know if any insiders have been buying here. It's got a sex number three rank, but they are turning it around on the earnings side.
Revenue side still not much revenue growth. So just up 1.1% for this fiscal year and 2.5% for the next fiscal year, but over $1 billion in revenue, expected $1.38 billion this year, $1.41 billion next year. So not too small there, but so much depends on trends. And again, how much are they going to get hit by these tariffs?
So we're going to have to wait till June with Landsend to find out, but the shares are cheap here. And if these numbers hold on the earnings side, it's not actually a trap. It is looking more like a value. So that's Landsend ticker LE.
I also want to mention I did not look at the individual stocks of these companies before I decided to do them. And so I'm just as surprised as all of you and we're learning as we go along. So we have Levi's more of a trap. Landsend looking like a value.
What will this third one be that was on the screen? I chose Ulta Beauty. I do own it in my own personal portfolio and I've owned it since 2014 now. So I've stuck around.
I have sold some shares a couple of times in there. And I think I bought at least one time. They have not yet reported earnings reporting on May 29th. So we'll see P.E.
of about 18. So they just came in a little bit under that 20 level. And what's going on with their earnings? So the analysts are all over the place.
One is down in the last seven days. One is up over the last 60 days for a bed cut for this year and next year. Nobody is raising for next year yet. Everybody's too concerned about this year.
They're not paying much attention to what could be a turnaround for next year. So the analysts unclear. We're looking for 2303 that is down from 2377 just 90 days ago. And it's expected to be a decline of 9.1% from last year at 2534.
So we'll find out how much they're being impacted by tariff impacts in a couple of weeks here. But it looks like based on what the analysts are doing with these estimates and they're coming down a bit, they may be being impacted. Also, we don't know on the consumer side. Historically, beauty has held up fairly well as a category, especially someone like Ulta that has both the prestige cosmetics.
That's like the more luxury, like the Lancomes, the Cliniques, Mac, that kind of stuff. And then they have the drugstore brands. So consumers can trade down. They can also trade down on skin care and hair.
And so Ulta is very well positioned to do all of that. But will they be? We don't know. This is where we might see the consumer pulling back because on some things with beauty, you don't have to have it.
It is much more discretionary on some items, but not all. So we'll see. But this is looking a little more value trappy here. Even with the PE of 18 that's not that cheap, I would like to see it get down a lot more before I was considering adding to my own position here.
It is off the recent lows, as we've seen many of these other than Lands End, apparently, be off of those lows. So it was cheaper at the April lows. And so I would be waiting maybe to see a little more of a pullback over the last month. It's up about 12%.
And then S&P 500, my little tracker is all over the place here. It just gave me 13% a minute ago. Now it's telling me 14%. But either way, it's underperforming S&P just slightly, but it's otherwise mostly tracking the movement of the S&P 500.
So when people got bullish on the S&P, so did they get bullish on Ulta. Year to date, it's down 5.3% year to date. And the S&P is almost flat now, year to date. Over the last year, it's up 6.5% and S&P up 10.3%.
And so a little bit of value trapping this on Ulta, but we'll wait and see what happens after this earnings report. But right now, it has an OK rank of 3 and we're waiting, but not cheap enough for me. So I'm putting it into more of the trap category. So that's Ulta Beauty, ticker ULTA.
Then let's take a look at Target. Target. What is going on there? They did report earnings already.
It was already a bad zax rank going into it. It was a 5 going into it. And the shares are down big. They were at five-year lows.
And now after the earnings, they're down again. And so everybody's been asking, like, is this a deal? How cheap can Target go? Well, as we know, from watching Walgreens Boots Lions, a lot of stocks can go down a lot lower than you might think, right?
So year to date, Target is down 31% now, year to date. And again, S&P 500 is about flat. Over the last month, since everybody else was rebounding, Target has tried. But a couple of weeks ago, it started to see some weakness again, but it's up 3% in the last month.
And then we had the S&P 500 up 13 to 14%, depending on what my chart is telling me. Over the last year, we're still down 39%. And then I said, we are at those five-year lows or near them right now. And it's down 20% in the five-year period, S&P 500 up 98%.
And this is when value investors normally try to start looking around and asking themselves is the street getting something wrong here? Am I missing something? Should I be running in when everybody else is running out? If you haven't been in it over the last five years, is this the deal now?
So it is trading with the Ford P right now of 11.5, but we're going to see those estimates being adjusted after this earnings report because they did miss on the last report. And so definitely the analysts are going to have to go in there and fix what they see they've missed here. So, yeah, we've already seen a bunch of estimate cuts even ahead of this. That's why we were at number five.
We had three estimates already being cut for the full year going into the report for this year and next year. And that's unusual, but those analysts did not get that wrong. They were right and even cutting in this quarter going in and they still missed on the quarter. So we're looking for a decline of earnings this year, not surprising, but only 3.6%.
Right now we have earnings of 8.54. We're going 8.86. This probably will be cut again. So it is going to decline a bit more.
But you know what that means? That does mean a bit of a trappiness situation. Then again, we have the PE of 11.5. Is that all that cheap either?
I don't know. If I'm looking at a five year low, do I want to pay 11 times for it? I get greedy on these things. When I get cheap, I want to get it cheap.
Right? And if a company's got a lot of problems or things going on, then I want to definitely get it as cheap as I can. So 11.5, not that cheap on the PE. Over under 10 is a dirt cheap stack.
So we have both falling earnings. We've got 11.5. This is more of a value trap here. And they haven't turned it around.
We've got the trade war going on. They did see some success in some of their apparel. They had a very strong showing with the Kate Spade collection that they were like co-sharing with them. They're still struggling in a few other categories though.
And so it might take a little bit longer for Target to figure out and turn this around. So I'm waiting to get a cheaper. That's Target TGT. I think they're still paying that big dividend though.
It is yielding over 4%. I mean, look, what it is at right now, 4.6%. But when you're getting the destruction on the stack like you are, the dividend is not really making up for what's going on. So Target TGT is a trap.
Okay, then we're going to finish with. We need some good news. We're going to finish with Deckers. It is one of my favorite retailers and has been for a number of years.
I lamented not buying it several times now. In 2021 and 2022 when it had some sell-offs. Well, we had another sell-off. It is up off the Liberation Day lows, but still down sharply from its highs.
It is reporting this week and it hasn't at the time I'm recording this. Its PE is right at the level we screened for, but it did not show up in our screen because it's a ZAC's number four going into its report. So it's right at 20, 20 times. But many times I've waited for it to go under 20 and then it never did.
So I'm waiting again and we'll see, right? It has a very good earnings price track record, just one miss in 2021. And so it's been able to be green throughout. It's Kenneth with supply chain issues.
The last miss it had was a result of pandemic supply chain issues. So are we seeing that again or will we see that again here with the trade war? So right now for fiscal 2025, I guess this would be, it is looking for earnings growth of 21% this year. But what are the analysts doing?
There's one that has been cut in the last 60 days. But four have been raised in that time period, 60 days. And then two are actually raised going into this report. It's very bullish.
What do they know? These analysts do know the industry and these companies. So we're looking for 590 this year. They made 486 last year, still have UGG, still have Hoka, still have Teva.
Remember Teva, it's or Tiva Teva Teva. It's their smallest brand now. But how is that performing? And I just bought a pair of Tevas and Foldis goes here, my first pair.
So they are on their way being shipped to me. So we'll see what goes on. But this brand is still strong. The management is good.
That's why I've liked the stock. This does not look like a trap here, at least before the earnings report. We'll see afterwards. But they have the strong earnings growth.
Also 15.6% on the sales revenue growth side. And then next year, fiscal 2026, I think they switch over in the middle of the year. They are looking at another 9% going into next year. So and like the end of the year and the holidays.
But we've got the number four because I'm not sure why. We just had that one cut 60 days ago. Could be one of those weird things right ahead of earnings. We get a number four as the old estimates drop off.
But this is looking good reporting May 22. So by the time you listen to this, they will have reported. So check in on Deckers. D-E-C-K.
This is one of the premier retailers. I do expect these premier players to perform better. But if I can get it at this cheaper level, it's not going to be a classic value. Then this could be a buying opportunity for even value investors here on a top company like Deckers.
I'm just taking a look kind of to see. Like I said, they hit new highs earlier this year, but a big sell off. So year to date, they are still down. 39% year to date.
This is what I mean about the sell off. One month, huge rebound up 22, almost 22% in the last month. Three months period, still down 17. So big sell off into the Liberation Day.
A nice rebound, but shares weakening a little bit ahead of this earnings report. Could see a spike on the earnings report, but still a long way to go to get back to those highs earlier, year to date. Well, over $200 a share. And right now, the stock is trading at $123.60 as I'm recording this on May 21st.
So that's Deckers Outdoor. Is this a buying opportunity? It looks like a value here based on its historic valuations and this big sell off. But we'll see in this next earnings report what the analysts do with these earnings estimates.
So Deckers D-E-C-K. Okay, so that's quite a mix. We had some good possible values in there. We had a couple that were traps.
So the traps side, Levi's, ticker, LEVI. Ulta's looking trappy here. They haven't reported yet. ULTA, target, trappy still.
TGT is that ticker. Lands End. Reporting in June, ticker LE looks like a value. Looks like a value there.
And Deckers just about to report D-E-C-K looks like a value, especially based on its historic valuations, trading around 20 times. That's cheap for Deckers, but we'll see in this earnings report. As with all retailers, it's really going to depend on what area they're in, where they manufacture, what are the consumers doing with this particular segment? And where is their focus?
Are they heavy into groceries? Like Walmart? Well, the consumers are still buying those. Or are they more into the apparel side where you could say, I'm just not going to buy some new pants or those new shorts for the summer.
So not Abercrombie Fitch. American Eagle already gave up preliminary numbers, but they're reporting soon, ticker LEO, and they warned. They said cold weather and the tariffs and they listed all these things about what was going wrong with there. So where else is going to see some of these things?
I'm always a little leery when they blame the weather, but I'm sitting in a sweater in Chicago on May 21st. So yeah, I might not want to buy those linen tops right now. If you're in Florida, where it's 100, you are buying the linen tops, but Florida might not be enough for that. And so American Eagle said they were going to have to write down spring and summer collection and get rid of that inventory.
That's never good for these retailers. Also be sure to watch RL. By the time you listen to this, RL will have already reported. It's been a stalwart also on the prestige side and those shares trading near it's all time five-year high.
So again, there is some good news on the retail side. Costco also trading near it's all time high. We haven't heard from them yet. So it's a doggy dog out there and we're going to continue to look for values in this area because again, there is a lot going on.
There is a lot that have sold off. There may be values among some of these names, but here we found two values and three traps, but we will resume in a couple of weeks looking at some of these. But I'll be bringing you more value stocks as we go along because there's plenty out there. And if you missed the lows of the Liberation Day, don't feel bad because there's always more pullbacks.
Those are healthy and normal in any stock market. So if you're missing out is real, but be patient as all value investors should be. So let me recap those stickers again. Levi, L-E-V-I, Lands End, L-E, Ulta, ULTA, TARGET, TGT, and Deckers, DECKERS, DECK.
As always, be sure to subscribe, get us on Apple, Spotify, Amazon, Music, and I'll see you again next week with some more value stacks.