Foot Locker, Inc. (FL) is adding to brick and mortar retailer pain as the trading week draws to a close, dropping more than 16% after sharply lowering year-over-year guidance in its first quarter confessional. While the results follow a barrage of sector shortfalls, a handful of traditional storefronts have defied aggressive selling pressure, attracting slow but steady buying interest.
These lesser-known mavericks generally fall into one of three categories. First, they offer products and/or services not easily obtainable through e-commerce. Second, they attract a unique demographic that walks the malls rather than surfs the Net. Third, they offer better value than Amazon.com, Inc. (AMZN) and other digital giants.
Children’s Place, Inc. (PLCE) has led the retail sector for years, with Walt Disney, Co. (DIS) licensed products underpinning strong quarterly results. It topped out near $72 in 2006 following a long uptrend and sold off to the mid-teens in 2008. A recovery wave into the new decade came up short, stalling at the .786 Fibonacci retracement level, ahead of weak price action that failed to clear resistance until March 2016 when it broke out into a series of new highs.
The stock has nearly doubled in price since the breakout, reaching $125 in the first quarter and testing that lofty level twice into May. It hasn’t broken out but continues to holding horizontal support near $104 and the 50-day EMA. A March breakaway gap between $100 and $110 may need to fill before the stock attracts more committed buyers so sidelined market players should keep their powder dry for now and await that common technical event.
Five Below, Inc. (FIVE) has found its niche in teen and pre-teen customers looking for all sorts of cheap but hip merchandise. It came public in the mid-20s in July 2012 and entered an immediate uptrend that hit an all-time high at $55.28 in November 2013. The subsequent decline tested the IPO opening print twice in 2015, holding support ahead of a 2016 recovery wave that reached within 3-points of multi-year resistance in August.
The stock sold off into October and posted a higher low in the mid-30s, ahead of a narrow consolidation that’s yielded a strong second quarter rally wave. That uptick has now reached the 2016 high, marking the next stage in a possible multi-year cup and handle breakout pattern. While price action has work to do before mounting resistance in the mid-50s, market players have taken notice, lifting the On Balance Volume (OBV) indicator to an all-time high.
Texas-based Rush Enterprises, Inc. (RUSHA) sells commercial vehicles in the Southeastern and Western USA. It topped out near $20 in 2007 and sold off to low single digits during the bear market. The subsequent recovery wave broke out in a series of new highs in 2013 and added to gains into the 2014 top at $38.27. A vicious downtrend then took control, continuing into the first quarter of 2016 when it bottomed out at a 5-year low in the mid-teens.
The bounce unfolded at the same trajectory as the prior decline, completing a 100% V-shaped retracement just four weeks ago. The stock is now pulling back from resistance while working off overbought technical readings and should hold strong support in the mid to upper-20s. A higher low in that price zone could set the stage for a major breakout that reaches the low-60s as a measured move target.
The Bottom Line
Brick and mortar retailers have been crushed by weak results and dismal outlooks throughout first quarter earnings season, but a handful of lesser known storefronts quietly have prospered, with unique products, demographics or locations underpinning surprisingly strong metrics.