Retail Penny Stocks Continuing A Summer Surge
Call them consumer penny stocks, retail penny stocks, even epicenter penny stocks. Whatever you do, you might not want to count them out quite yet. It’s no secret that 2020 has been a difficult year for the economy. Quite possibly, one of the hardest-hit industries has been retail. Now, I’m not talking about eCommerce retail.
I’m talking about those who have a “brick-and-mortar-first” approach selling products. These are the stores you probably remember going to on a relaxing trip to the mall; remember those things?
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Fast-forward a few months and this “mall concept” could shift into additional warehouse space for Amazon (AMZN Stock Report). The online retailer was said to have explored options to turn some unused JC Penney & Sears shells as additional distribution centers. While discussions began prior to COVID according to reports, the conversations recently came back to light. Saying that retail suffered this year requires a bit of a different lens.
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If you’re talking about online retail, 2020 has become one of the top years for eCommerce and tech, in general. The Amplify Online Retail ETF (IBUY Report) has surged to all-time highs this year. Some of its top holdings include names like Overstock.com, Carvana, Jumia Technologies, Peloton, Wayfair, and Paypal to name a few.
This continued pushing the narrative that online commerce is taking over. However, we’ve got the evolution of brick and mortar that’s now turning into “brick-and-click.”
It comes down to how retailers can evolve; especially in a brick-and-mortar situation. Some are implementing smaller store footprints, downsized physical presence as a whole, and new online initiatives to push digital sales. In light of this, we’ve started to see a rebirth of a few names. In light of President Trump’s latest moves this weekend, some are trending right now. Will this trend continue in August?
Retail Penny Stocks to Watch: Express Inc.
A popular storefront across America’s malls, Express Inc. (EXPR Stock Report) was already suffering heading into 2020. Despite a surge to highs of around $6 late last year, EXPR stock stood no chance against COVID-19. The now-penny stock dropped to lows of $1 at the end of July as closures hurt the street value of the company.
However, in a recent corporate update, the company shed some light on its new initiatives for 2020. It involved a larger focus on eCommerce as you might imagine. Express said that it saw “significant” increases in eCommerce demand and “apparent stabilization” in-store sales and traffic in July. The company expects Q2 comp-store sales to be down 24% with net sales down 48%, year over year.
“Our second consecutive month of positive eCommerce demand coupled with the apparent stabilization in-store sales and traffic indicate that our new product vision and brand positioning are resonating with customers. I expect our comparable sales trend to improve as we resume flowing new receipts over the next several weeks,” said Tim Baxter, Chief Executive Officer.
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During the quarter, the company said that it was also able to reduce expenses and capital expenditures. Things like inventory reduction, furloughing most of its workforce, and freezing hiring all contributed. With official earnings results coming later this month, it would appear that, for now, market sentiment has turned slightly bullish. Shares have climbed about 22% since the end of July.
Retail Penny Stocks to Watch: Chico’s FAS, Inc.
Chico’s FAS, Inc. (CHS Stock Report) joins express in reporting earnings later this month. Both companies will reveal second-quarter results on August 26th. While CHS stock hasn’t hit new 52-week lows recently, it has remained relatively stagnated in a sideways trend until recently. Since August 3rd, the penny stock has bounced back by as much as 20%.
There weren’t any corporate updates so far as to what the company expects for the quarter. However, if it’s anything like the last quarter, it could be interesting. In its Q1 report, Chico’s reported an EPS loss of $0.38 which didn’t compare to analysts expectations of “only” a $0.07 loss per share. Furthermore, the company reported revenue of $280.26 million, which missed estimates of $388.27 million by a wide margin. There weren’t any earnings guidance given either.
However, something to note is that at the start of July, the company returned its executives to full pay. This came after executive pay was cut starting April 5th. Since stores began reopening, will store sales show some improvement in the upcoming Q2 results? Recently appointed CEO Molly Langenstein had her hands full with the onset of this pandemic. She previously served as President of the Company’s two largest brands, Chico’s and White House Black Market. What’s crazy is that leading up to 2020, the company experienced 3 consecutive quarters of growth with a more than 9% increase in sales from Q1 to Q4 of 2019. Can the company turn things around again?
Retail Penny Stocks To Watch: Party City Holdco Inc.
Other retailers outside of apparel have also experienced a resurgence so to speak. Party City Holdco Inc. (PRTY Stock Report) has been one of the retail penny stocks we’ve watched for a while, actually. Back in May, Party City caught some attention while it was still trading around $0.70 and the drive-by birthday party became “a thing”. It also helped that the company made notable progress with its bondholders who held over $400 million in bonds.
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In June, Party City reported a Q1 net loss with declining revenue. However, with a surge of bankruptcies and closures resulting from coronavirus shut-downs, Party City also weathered the storm better than some. The company said it had a possible deal that would reduce its debt by 25% and raise $100 million in capital. In Q2, Party City reported better than expected sales results. What’s more important to note is that the company reported an 83% increase in North American eCommerce sales for the quarter. While June comp sales were down 6.5%, July brand coms were positive according to the company.
Brad Weston, Chief Executive Officer, stated, “Against a difficult, pandemic impacted backdrop, our teams continued to execute with discipline and demonstrate their resilience…We made progress on our key strategic priorities including the rapid launch and expansion of additional customer fulfillment options, as well as relevant merchandising and marketing strategies that resonated with our customers and reflected their evolving approach to celebrations.”
Is PRTY stock set to climb further this month or is the party over considering the upcoming Halloween selling season still has uncertainties?
2 comments
Party city may not be a good bet. Their biggest holiday is Halloween. Many states are already cancelling our looking at cancelling Halloween because of Corona virus. Many party city investors were looking forward to halloween to push the stock price up. This could spell disaster for party city.
Thank you for weighing in. Brick and “anything” does have its risks. It will be interesting to see how PartyCity deals with one of its biggest seasons, as you said.