The majority of brick-and-mortar retailers plummeted in reaction to the coronavirus pandemic and stay-at-home orders, prompting a rising number of bankruptcies that have included filings by J. C. Penney, Neiman Marcus, and J. Crew. Big box outlets have benefited at the same time, lifting Walmart Inc. (WMT) stock to an all-time high, while most smaller chains have bounced off deep lows but are still struggling to find buying interest.
Even so, a basket of traditional retailers is doing relatively well despite stiff headwinds and could trade even higher as the crisis eases. These mavericks are selling stuff that folks still need, or they hold a competitive advantage through market share. A handful have also solved the online sales challenge, building attractive portals that are keeping customers away from Amazon.com, Inc. (AMZN) and other retail behemoths.
Williams-Sonoma, Inc. (WSM) just beat top- and bottom-line first quarter 2020 estimates, reporting 2.6% comparative sales growth even though all 616 stores were closed in the second half of the first quarter. The stock posted an all-time high at $89.38 in the third quarter of 2015 and entered a downtrend that that eased in the low $40s in August 2017. The subsequent uptick stalled at $73.44 in August 2018, yielding a sell-off that found support at that level in December.
A January 2020 breakout failed two weeks later, giving way to a vertical decline that undercut the 2011 low before settling at $26.01 on March 18. The stock turned higher into April, carving a V-shaped pattern that mounted January resistance on Wednesday. The on-balance volume (OBV) accumulation-distribution indicator has risen to an all-time high at the same time, setting the stage for a critical test at the stock price's all-time high. The bullish volume divergence raises the odds that the rally will eventually exceed this barrier in a new bull market leg.
Dick's Sporting Goods, Inc. (DKS) stock topped out in the upper $50s in 2016 and entered a downtrend that found support in the mid-$20s in the fourth quarter of 2017. The stock then eased into a slow-motion recovery wave, stalling at the .618 sell-off retracement level in December 2019. An orderly pullback accelerated into a freefall at the end of February, breaking 2017 support before coming to rest at an 11-year low in the low teens.
The subsequent bounce has now reached the .618 sell-off retracement level, which marks a common turning point after an oversold bounce. OBV has lifted to an all-time high at the same time, generating a bullish divergence suggesting that the stock will eventually break this barrier and reach the December peak near $50. Even so, it's probably best to wait for a pullback to the 50-day exponential moving average (EMA) near $30 before thinking about jumping on board.
MarineMax, Inc. (HZO) sells recreational boats and yachts. The company just advised that positive retail activity has continued, while other boat retailers are reporting 30% to 50% increases in 2020 sales as a result of the pandemic. This matches a similar surge for recreational vehicle sales, which makes sense because steering a boat is a perfect way to practice social distancing as long as it isn't a cruise ship with massive capacity and a closed ventilation system.
MarineMax stock topped out at $28.69 in 2015 after a six-year uptrend, entering a decline that found support in the mid-teens a few months later. It finally broke that trading floor in March 2020, dropping to a seven-year low in the single digits before entering a V-shaped pattern that has recouped all but two points of the first quarter sell-off. OBV has lifted back to the 2015 high at the same time, likely signaling the end of the five-year downtrend.
The Bottom Line
A handful of traditional retailers are attracting unusual second quarter buying interest that could offer opportune profits for carefully timed long positions.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.