2 Specialty Retailer Stocks to Avoid This Week The continued supply chain disruptions and rising prices have adversely affected the retail industry, particularly specialty retailers. With the possibility of the economy entering a recession, specialty retailers are expected...
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The continued supply chain disruptions and rising prices have adversely affected the retail industry, particularly specialty retailers. With the possibility of the economy entering a recession, specialty retailers are expected to be affected by declining consumer demand. Thus, it could be wise to avoid fundamentally weak specialty retail stocks Party City Holdco (PRTY) and Wayfair (W). Let's discuss….
The retail industry has been struggling to stay afloat amid the multi-decade high inflation and continued supply chain disruptions. Rising prices have dampened consumer demand significantly. In addition, supply chain bottlenecks and increased freight costs have made it difficult for them to maintain the required inventory.
Moreover, with rising recession fears dampening consumer sentiment further, retailers are expected to remain under pressure. Investors' avoidance of retail stocks is evident from the VanEck Vectors Retail ETF's (RTH) 11.5% year-to-date decline.
Hard-hit specialty retail stocks Party City Holdco Inc. (PRTY) and Wayfair Inc. (W) are expected to remain under pressure due to deteriorating financials, rising costs, and bleak growth prospects. So, these stocks are best avoided now.
Party City Holdco Inc. (PRTY)
PRTY provides party goods through approximately 830 company-owned and franchise outlets in North America. It offers paper and plastic tableware, metallic and latex balloons, Halloween and other costumes, accessories, novelties, gifts, and stationery under the Party City and Halloween City names.
PRTY's gross profit for the fiscal first quarter ended March 31, 2022, declined 9.4% year-over-year to $138.01 million. The company's loss from operations came in at $20.05 million, compared to an operating income of $54K in the year-ago period. Its net loss and net loss per share widened 91.2% and 84.6% year-over-year to $26.89 million and $0.24.
Analysts expect PRTY's EPS for the quarter ended June 30, 2022, to decrease 79.3% year-over-year to $0.06. Its revenue for the to-be-reported quarter is expected to decline marginally year-over-year to $529.40 million. The stock has lost 76.5% year-to-date to close the last trading session at $1.31
PRTY's weak fundamentals are reflected in its POWR Ratings. It has an overall rating of D, equating to a Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an F grade for Growth and Stability and a D for Momentum. It is ranked #40 out of 46 stocks in the Specialty Retailers industry. Click here to see the other ratings of PRTY for Value, Sentiment, and Quality.
Wayfair Inc. (W)
W is an e-commerce platform for home furnishings. It offers a selection of furniture, décor, housewares, and home improvement products under five brands: Wayfair, Joss & Main, AllModern, Birch Lane, and Perigold.
For the fiscal second quarter ended June 30, 2022, W's total net revenue decreased 14.9% year-over-year to $3.28 billion. The company's adjusted EBITDA loss came in at $108 million, compared to an adjusted EBITDA of $311 million in the year-ago period.
Also, its net loss came in at $378 million, compared to a net income of $131 million in the year-ago period. In addition, its adjusted loss per share came in at $1.94, compared to an adjusted EPS of $1.89 in the year-ago period.
For the quarter ending September 30, 2022, W's revenue is expected to decline 0.4% year-over-year to $3.11 billion. Its EPS is expected to decrease 392.7% year-over-year to $6.79 for fiscal 2022. The stock has declined 67.2% year-to-date to close the last trading session at $62.31.
W's poor prospects are also apparent in its POWR Ratings which give it a Strong Sell rating. It also has an F grade for Sentiment and a D for Growth, Momentum, Stability, and Quality. Within the same industry, it is ranked #45. To see the other rating of W for Value, click here.
PRTY shares fell $0.06 (-4.58%) in premarket trading Monday. Year-to-date, PRTY has declined -77.02%, versus a -11.74% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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