Best Buy (NYSE:BBY): Like many of its peers, Best Buy became one of Amazon’s many victims on its path to the top. Consumers used Best Buy as a showroom for purchases that ended up taking place on Amazon, thereby causing financial performance to freefall in recent years. Despite a bleak looking future, Best Buy instilled new confidence in investors following two consecutive earnings reports. The company’s 5 point Renew Blue program achieved remarkable success over this time. It includes strengthening vendor relationships, renovating stores, eliminating unnecessary costs, increasing same store sales and ramping up Best Buy’s online business. Best Buy also uses deep discounts to compete with retail giants like Amazon and Walmart. While many of these initiatives provide some near term support that investors love, the long term sustainability remains unclear.
Lowe’s Companies (NYSE:LOW): Shares of the home improvement retailer increased nearly 12 percent from a year earlier but over the past 6 months it dropped by nearly 2.5 percent owing to back to back weaker than expected quarterly reports. In each of the past 2 quarters financial performance missed Estimize’s target top and bottom line projections by a significant margin. Expectations for the upcoming report have rebounded however, thanks to a steadily improving labor market, recovering housing market and several new initiatives undertook during the quarter. Meanwhile, business in Canada continues to grow at a rapid clip with strong comps in the past three year. To the downside, Lowe’s must wrestle market share back from Home Depot (NYSE:HD), which made greater gains in recent quarter, while also dealing with Amazon’s growing presence in the retail space.
Dollar Tree (NASDAQ:DLTR): The current consumer spending environment favors deep discounters like dollar stores but after a huge runup following the financial crisis, Dollar Tree faces a new uphill climb. The unrealistic expectations placed on Dollar Tree in recent quarters contributed to weak results over the past 2 quarters. Beyond that, a slight pickup in consumer spending shifted demand back to traditional value channels like Walmart. To offset the recent volatility Dollar Tree remains committed to integrating Family Dollar stores, remodeling preexisting stores, opening new ones and sticking to an aggressive pricing strategy. Of course rapid expansion puts the company at risk of cannibalizing its own business and further hampering growth.
American Eagle (NYSE:AEO): Teen retailers continue to get hammered despite the slight improvements taking place in the retail sector. American Eagle fortunately bypassed many of the losses of its peers and is well positioned to gain alongside the entire retail industry. Constant efforts to enhance its brand through new offerings have driven both earnings and revenue growth higher in recent quarters. This commitment is largely focused on the Aerie brand which remains the fastest growing portion of the business. American Eagle still faces a host of troubles such as an overdependence on external suppliers and heavy international exposure. Unfavorable currency trends along with weak tourist spending will also likely pressure sales volume.