Ulta Salon, Krispy Kreme, Express Lead Retailers to Earnings Woodshed

Richard Suttmeier
December 9, 2013

NEW YORK (TheStreet) -- When you look at last week's earnings reports from many retail-oriented companies the message is clear that consumers on Main Street have significantly cut back spending. Ulta Salon   is not selling the quantities of beauty and salon products that Wall Street expected and the stock lost 25% of its value on its way to the earnings woodshed. Consumers lost their sweet tooth for Krispy Kreme  donuts and its stock got creamed by 21.3%. Express  reported disappointing sales of their specialty men's and women's apparel and its share price was stripped by 21.1%.

On Dec. 2, I wrote Krispy Kreme, Men's Wearhouse Headline Earnings and four of the eight stocks in this post were sent to the earnings woodshed. Men's Wearhouse  delayed its earnings report to this Wednesday in afterhours trading.

On Wednesday, I wrote Dollar General, Joseph A Bank Headline Earnings and four of the nine stocks in this post were sent to the earnings woodshed.

As I said in a recent post, the U.S. economy has been generating what some economists call dead-end jobs, not career-starting opportunities.

The Federal Reserve wants a higher inflation rate, while Main Street struggles with a higher cost of living. Family incomes are down. Health care costs are on the rise. Homeowners face higher property taxes as home prices rise with higher home insurance costs. Savers earn zero on their money and these folks never invested in the stock market and never will. Interest rates are significantly higher on consumer credit cards and on small business lines of credit. The bottom line is that Fed policy has failed to help Main Street and recent earnings from retailers support this notion.

All eight woodshed stocks in today's post are in the retail-wholesale sector and their price declines from either last Friday's close or from last Tuesday's are down between 7.1% and 25%. Because of this weakness three of the buy rated stocks were upgraded to strong buy according to www.ValuEngine.com. Three have become undervalued by 7.3% to 15.3%, while one of the four overvalued stocks is overvalued by 116.4%. Two are now down 7.7% and 35.9% over the last 12 months, while five still have gains between 22.1% and 120.4% over the last 12 months. One was already below its 200-day simple moving average, while four broke below their 200-day SMAs on the way to the earnings woodshed. This shows the power of returning to the mean.

Aeropostale  ($9.00 vs. $10.32 on Nov.29) missed EPS estimates by 4 cents reporting a loss of 29 cents a share in the afterhours on Nov. 4. The hold rated stock fell to $8.42 on Nov. 5 ending the week down 12.8% since Nov.29. The retailer of casual apparel targeted to teenagers is 116.4% overvalued and is now down 35.9% over the last 12 months and has been below its 200-day SMA at $12.22 since August 8. My monthly pivot is $9.88.

Big Lots  ($32.47 vs. $38.96 on Tuesday) missed EPS estimates by 8 cents reporting a loss of 16 cents a share premarket on Nov. 6. The buy rated stock fell to a low of $31.52 ending the week down 16.7% since Dec. 3. The close-out retailer of merchandise and toys is now 7.3% undervalued and is still up a modest 8.6% over the last 12 months and gapped below its 200-day SMA at $35.70. My quarterly pivot is $36.41 with a semiannual risky level at $44.47.

Bob Evans Farms  ($51.31 vs. $55.59 Nov. 29) missed EPS estimates by 19 cents earning 56 cents a share in the afterhours on Tuesday. The buy rated stock fell to a low of $49.28 on Wednesday staying above its 200-day SMA at $49.12 ending the week down 7.7% since Nov. 29. The food distributor and restaurant chain is 19.1% overvalued and still up 27.9% over the last 12 months. My semiannual value level is $48.72 with a weekly pivot at $52.63 and quarterly risky level at $59.24. 

Express ($19.57 vs. $24.61 on Nov. 29) missed EPS estimates by 2 cents earning 23 cents a share premarket on Wednesday. The buy rated stock was upgraded to strong buy after the stock plunged 21.1% from Nov. 29 to $18.58 well below its 200-day SMA at $20.99. The specialty retailer of men's and women's apparel is just 1.1% overvalued and is still up 36.9% over the last 12 months. My quarterly value level at $19.48 becomes a pivot with weekly and monthly risky levels at $23.41 and $26.75.

Five Below  ($45.29 vs. $50.49 on Tuesday) matched EPS estimates earning 5 cents a share in the afterhours on Thursday. The buy rated stock which closed Nov. 5 below its 50-day SMA at $49.27 plunged further on Nov. 6 to a day's low at $45.00 well above its 200-day SMA at $41.54 ending the week down 10.3% from Tuesday. The specialty retailer of merchandise for teens and pre-teens is still up 30.5% over the last 12 months. My quarterly value level is $39.53 with a monthly pivot at $47.64 and weekly risky level at $54.56.

Krispy Kreme ($19.97 vs. $25.38 on Nov. 29) matched EPS estimates earning 16 cents a share in the afterhours on Dec. 2. The buy rated stock was upgraded to strong buy as it gapped below its 50-day SMA at $23.59 trading down to $19.57 on Tuesday staying above its 200-day SMA at 18.70 ending the week down 21.3% from Nov.29. The iconic donut maker is 11.9% overvalued and is still up a strong 120.4% over the last 12 months. My quarterly value level is $17.20 with a weekly risky level at $24.38.

Ulta Salon ($93.76 vs. $125.01 on Tuesday) missed EPS estimates by 2 cents earning 72 cents a share in the afterhours on Thursday. The buy rated stock was upgraded to strong buy as it gapped below its 200-day SMA at $102.12 to a low of $91.70 on Dec. 6 ending the week down 25% from Tuesday. The beauty and salon products company is now 15.3% undervalued and is down 7.7% over the last 12 months. My semiannual pivot is 104.65 with a semiannual risky level at $121.59.

Zumiez ZUMZ ($25.57 vs. $27.53 on Tuesday) matched EPS estimates earning 46 cents a share in the after hours on Thursday. The buy rated stock already fell below its 200-day SMA at $27.95 on Dec. 2 and traded to a week's low at $25.05 on Friday ending the week down 7.1%. The retailer of action related apparel and footwear is 12.7% undervalued and is still up 22.1% over the last 12 months. This week's risky level is $29.08.

At the time of publication the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

EXCLUSIVE OFFER: See inside Jim Cramer’s multi-million dollar charitable trust portfolio to see the stocks he thinks could be potentially HUGE winners. Click here to see his holdings for FREE.