Today’s 60bp negative revision for January Retail Sales (from +0.2 to -0.4%) was obviously disappointing, albeit not terribly surprising to anyone listening to retail conference calls over the past four weeks. Let’s step away from the obvious for a minute and look at a powerful trend that’s actually investable. We’re referring, of course, to online growth. Now…before you jump on us and say that OF COURSE the whole planet knows that e-commerce is gaining share, we’ll remind you of something we often say at Hedgeye “Investors are Bullish, Bearish, or Not Enough of Either.” Simply put, even Bears rarely gauge how bad things will get, and Bulls often are way too conservative. We think the latter is spot-on as it relates to online sales.
Today, e-commerce accounts for 7.3% of total Retail Sales. A decade ago that number was 2.5%, and five years ago it was 4.4%. At face value we’re talking really small numbers…right? Not really. Consider this…in the fourth quarter, e-commerce accounted for 65% of all incremental Retail Sales. That’s S-I-X-T-Y F-I-V-E percent! This ramped from 23% a year ago, and 45% in the prior quarter. This not only speaks to the growth of e-comm, but also the sustainability (and likely share gain) when people otherwise don’t want to venture out to a mall. Also consider that the 65% growth share translates to about $100bn on a ttm basis. That alone is bigger than the entire Women’s apparel category.
For those who might not be Bullish or Bearish ‘Enough’, here are the names that will win and lose as this continues to play out…
Losers: KSS, JCP, M, JWN, FL, HIBB, FINL, DKS, GME, GPS, HBI, LULU, BBBY, BBY
Winners: AMZN, NKE, ETSY, KATE, RL, UA, RH, WSM, ULTA, LB, COST