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Short Sold FL and RTH, Retailers out look poor

Foot Locker will probably be one of the hardest hit in a recession.  Goldman Sachs cut the stock to sell mid January with a target price of $10 http://biz.yahoo.com/ap/080115/sector_snap_athletic_footwear.html?.v=1   I was happy to find Goldman Sachs looking for a sell on the stock.  They are one of the most accurate stock pickers.  FL has bounced recently along with the RTH index and looks like it should retest it’s lows in my opinion.  I don’t see any thing that can make the shoe retailers future look bright.  New shoes are something that most people including myself will cut back on when money is tight or for lack of exciting new products. http://www.forbes.com/2008/01/15/hibbett-sport-closer-markets-equity-cx-ra-0115markets42.html?partner=yahootix  The company is in a very competitive market.  With manufacturers raising the prices on the shoes they sell and cost fixed margins will be small.  Foot Locker and retailers are put in a bad situation to deal with declining margins or sales depending on how they price the shoes on the shelves.  

On the other hand the buy side argument for FL is a small amount of insider buying,  a divident yield of 3%, and 150 store closings.  Much of the labor lay offs will be swallowed by workers rather than the corporation.  

With the market looking like it is rolling over I shorted the RTH.  The idex is in a down trend and has recently bounced higher making a good entry as fundamentals of the Retailers deteriorating.  I looked further at the components of the RTH to see what I was shorting more precisely. The largest components are listed at yahoo  http://finance.yahoo.com/q/hl?s=RTH   AMZN 7%, BBY5%, COST6%,CVS6%HD11%,KR4%,LOW7%,TGT8%,WMT18%

entertainment purposes only

February 4, 2008 - Posted by | Uncategorized | , , , , , , ,

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