The “Retail Isn’t Dead” Trade May be Stalling Out

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  • As far back as 2017, analysts were calling for the death of retail, particularly with mall-related names. As e-commerce and big box stores increased their market share, the traditional mall seems to have died out. Covid didn’t help either.

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  • Yet many of these names have moved higher in the past few months. That’s partly market optimism, and partly these stores pivoting towards online sales as well. But the trend may be playing out.

    The poster child for this phenomenon is Urban Outfitters (URBN). The company recently disappointed on holiday sales numbers, and shares were downgraded at JPMorgan.

    The issue? Even with a push towards online sales, the company still operates a network of retail stores, largely in densely-populated areas. Same store sales have improved in recent months, but are nowhere near coming back to their old highs. With stores open but sales down, a challenging year is ahead for Urban Outfitters—and many similar mall-based retail names.

    Action to take: Shares have had a challenging time holding $31, and may have just formed a double-top. While more stimulus measures could push shares higher in any event, shares appear to be starting a longer-term downtrend.

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  • Traders can take advantage of this with the June 2021 $26 put option. Shares would need to decline about 10 percent for the trade to move in-the-money, but at a price of $3.10, traders could make a high double-digit return playing the downside of a stock, even if the overall market continues to trend upwards.