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Lowe’s earned more than expected in the third quarter but the stock was tumbling after the home-improvement retailer reported disappointing sales and noted that consumers were reining in spending.
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Tag: Household Goods Retailing
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WeWork’s stock has continued the strange trend of the bankruptcy bounce
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In a strange flashback to the demise of Bed Bath & Beyond Inc., WeWork Inc.’s stock soared on its over-the-counter debut this week, just days after the office sharing company filed for chapter 11 bankruptcy protection.
WeWork
WEWKQ,
+23.02%
filed for Chapter 11 in New Jersey on Monday and the beleaguered company’s stock was halted before the open that day. The New York Stock Exchange started the delisting process for WeWork that same day.Trading resumed over the counter on Wednesday, with WeWork shares ending their first session as an OTC stock up 91.5%.
A similar scenario happened when shares of Bed Bath & Beyond began trading over the counter in May after the Nasdaq started the delisting process for the bankrupt home-goods retailer and sometime meme-stock darling. Despite Bed Bath & Beyond’s well-documented woes, the stock ended its first session as an OTC stock up 30.4%. Bed Bath & Beyond’s shares were canceled in September.
In June Overstock.com acquired Bed Bath & Beyond’s intellectual property, and began operating as Bed Bath & Beyond, before changing its corporate name to Beyond Inc.
BYON,
+2.06% .Like Bed Bath & Beyond, WeWork has continued to attract investor attention even as the company’s problems mounted. In mid-September WeWork’s stock saw a record run-up amid meme stock chatter, just weeks after WeWork warned that it may not be able to stay in business.
Related: WeWork files for bankruptcy, capping a stunning downfall
Users on social media noted the activity in WeWork’s share price this week, with Twitter user @asunapg warning Thursday that the OTC markets are “much more volatile and often a death trap for a lot of companies.”
“Here we go again” tweeted @B2Investor Friday, with popcorn and clown emojis.
WeWork’s stock ended Thursday’s session down 21.3% and the stock is down 12.7% Friday, compared with the S&P 500 index’s
SPX
gain of 1.3%.Related: Why investors gamble on shares of bankrupt companies — Bed Bath & Beyond, for example
Tom Bruni, head of content at StockTwits, a social platform for investors and traders, told MarketWatch that, from what he is seeing, there doesn’t seem to be broad interest in the stock.
“Unlike Bed Bath & Beyond and others where it seemed possible to restructure and continue operating, the current situation for WeWork is mainly a math equation,” he told MarketWatch. “It’s looking most likely that it’ll be bought out, the question is at what price and how much cash (if anything) does that leave for common shareholders to receive? The consensus right now is that all value from its 52 million shares of common stock will be wiped out.”
Set against this backdrop, short covering could be driving the stock price up in the short term, according to Bruni. “Many market participants don’t want to risk being squeezed by unexpected good news, so they’d rather take their gains than ride it all the way down to zero,” he said. “Should that high short interest start to create sustainable upside momentum (more than a few days), then we’d likely see other traders get involved on the long side.”
“But for now, with earnings season in full swing, there’s plenty of volatility and news elsewhere for investors/traders to focus on,” he added.
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These 20 stocks in the S&P 500 are expected to soar after rising interest rates have pushed down valuations
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Two things investors can be sure about: Nothing lasts forever and the stock market always overreacts. The spiking of yields on long-term U.S. Treasury securities has been breathtaking, and it has led to remarkable declines for some sectors and possible bargains for contrarian investors who can commit for the long term.
First we will show how the sectors of the S&P 500
have performed. Then we will look at price-to-earnings valuations for the sectors and compare them to long-term averages. Then we will screen the entire index for companies trading below their long-term forward P/E valuation averages and narrow the list to companies most favored by analysts.Here are total returns, with dividends reinvested, for the 11 sectors of the S&P 500, with broad indexes below. The sectors are sorted by ascending total returns this year through Monday.
Sector or index 2023 return 2022 return Return since end of 2021 1 week return 1 month return Utilities -18.4% 1.6% -17.2% -11.1% -9.6% Real Estate -7.1% -26.1% -31.4% -3.0% -8.8% Consumer Staples -5.4% -0.6% -6.0% -2.2% -4.4% Healthcare -4.2% -2.0% -6.1% -1.7% -3.3% Financials -2.5% -10.5% -12.7% -2.5% -4.7% Materials 1.3% -12.3% -11.2% -1.9% -7.0% Industrials 3.5% -5.5% -2.1% -1.8% -7.3% Energy 4.0% 65.7% 72.4% -1.9% -1.4% Consumer Discretionary 27.0% -37.0% -20.0% -0.6% -5.2% Information Technology 36.5% -28.2% -2.0% 0.8% -5.9% Communication Services 42.5% -39.9% -14.3% 1.1% -1.3% S&P 500
13.1% -18.1% -7.4% -1.1% -4.9% DJ Industrial Average
2.5% -6.9% -4.5% -1.7% -4.0% Nasdaq Composite Index
COMP28.0% -32.5% -13.7% 0.3% -5.1% Nasdaq-100 Index
36.5% -32.4% -7.7% 0.5% -4.2% Source: FactSet Returns for 2022 are also included, along with those since the end of 2021. Last year’s weakest sector, communications services, has been this year’s strongest performer. This sector includes Alphabet Inc.
GOOGL
and Meta Platforms Inc.
META,
which have returned 52% and 155% this year, respectively, but are still down since the end of 2021. To the right are returns for the past week and month through Monday.On Monday, the S&P 500 Utilities sector had its worst one-day performance since 2020, with a 4.7% decline. Investors were reacting to the jump in long-term interest rates.
Here is a link to the U.S. Treasury Department’s summary of the daily yield curve across maturities for Treasury securities.
The yield on 10-year U.S. Treasury notes
jumped 10 basis points in only one day to 4.69% on Monday. A month earlier the 10-year yield was only 4.27%. Also on Monday, the yield on 20-year Treasury bonds
rose to 5.00% from 4.92% on Friday. It was up from 4.56% a month earlier.Market Extra: Bond investors feel the heat as popular fixed-income ETF suffers lowest close since 2007
The Treasury yield curve is still inverted, with 3-month T-bills
yielding 5.62% on Monday, but that was up only slightly from a month earlier. An inverted yield curve has traditionally signaled that bond investors expect a recession within a year and a lowering of interest rates by the Federal Reserve. Demand for bonds pushes their prices down. But the reverse has happened over recent days, with the selling of longer-term Treasury securities pushing yields up rapidly.Another way to illustrate the phenomenon is to look at how the Federal Reserve has shifted the U.S. money supply. Odeon Capital analyst Dick Bove wrote in a note to clients on Friday that “the Federal Reserve has not deviated from its policy to defeat inflation by tightening monetary policy,” as it has shrunk its balance sheet (mostly Treasury securities) to $8.1 trillion from $9 trillion in March 2022. He added: “The M2 money supply was $21.8 trillion in March 2022; today it is $20.8 trillion. You cannot get tighter than these numbers indicate.”
Then on Tuesday, Bove illustrated the Fed’s tightening and the movement of the 10-year yield with two charts:
Odeon Capital Group, Bloomberg
Bove said he believes the bond market has gotten it wrong, with the inverted yield curve reflecting expectations of rate cuts next year. If he is correct, investors can expect longer-term yields to keep shooting up and a normalization of the yield curve.
This has set up a brutal environment for utility stocks, which are typically desired by investors who are seeking dividend income. In a market in which you can receive a yield of 5.5% with little risk over the short term, and in which you can lock in a long-term yield of about 5%, why take a risk in the stock market? And if you believe that the core inflation rate of 3.7% makes a 5% yield seem paltry, keep in mind that not all investors think the same way. Many worry less about the inflation rate because large components of official inflation calculations, such as home prices and car prices, don’t affect everyone every year.
We cannot know when this current selloff of longer-term bonds will end, or how much of an effect it will have on the stock market. But sharp declines in the stock market can set up attractive price points for investors looking to go in for the long haul.
Screening for lower valuations and high ratings
A combination of rising earnings estimates and price declines could shed light on potential buying opportunities, based on forward price-to-earnings ratios.
Let’s look at the sectors again, in the same order, this time to show their forward P/E ratios, based on weighted rolling 12-month consensus estimates for earnings per share among analysts polled by FactSet:
There is a limit to how many columns we can show in the table. The S&P 500’s forward P/E ratio is now 17.94, compared with 16.79 at the end of 2022 and 21.53 at the end of 2021. The benchmark index’s P/E is above its 10- and 15-year average levels but below the five-year average.
If we compare the current sector P/E numbers to 5-, 10- and 15-year averages, we can see that the current levels are below all three averages for four sectors: utilities, real estate, financials and communications services. The first three face obvious difficulties as they adjust to the rising-rate environment, while the real-estate sector reels from continuing low usage rates for office buildings, from the change in behavior brought about by the COVID-19 pandemic.
Your own opinions, along with the pricing for some sectors, might drive some investment choices.
A broader screen of the S&P 500 might point to companies for you to research further.
We narrowed the S&P 500 as follows:
- Current forward P/E below 5-, 10- and 15-year average valuations. For stocks with negative earnings-per-share estimates for the next 12 months, there is no forward P/E ratio so they were excluded. For stocks listed for less than 15 years, we required at least a 5-year average P/E for comparison. This brought the list down to 138 companies.
- “Buy” or equivalent ratings from at least two-thirds of analysts: 41 companies.
Here are the 20 companies that passed the screen, for which analysts’ price targets imply the highest upside potential over the next 12 months.
There is too much data for one table, so first we will show the P/E information:
Company Ticker Current P/E to 5-year average Current P/E to 10-year average Current P/E to 15-year average SolarEdge Technologies Inc. SEDG 89% N/A N/A AES Corp. AES 66% 75% 90% Insulet Corp. PODD 18% N/A N/A United Airlines Holdings Inc. UAL 42% 50% N/A Alaska Air Group Inc. ALK 51% 57% N/A Tapestry Inc. TPR 39% 49% 70% Albemarle Corp. ALB 39% 50% 73% Delta Air Lines Inc. DAL 60% 63% 21% Alexandria Real Estate Equities Inc. ARE 59% 68% N/A Las Vegas Sands Corp. LVS 96% 78% 53% Paycom Software Inc. PAYC 61% N/A N/A PayPal Holdings Inc. PYPL 33% N/A N/A SBA Communications Corp. Class A SBAC 27% N/A N/A Advanced Micro Devices Inc. AMD 58% 39% N/A LKQ Corp. LKQ 92% 44% 78% Charles Schwab Corp. SCHW 75% 54% 73% PulteGroup Inc. PHM 94% 47% N/A Lamb Weston Holdings Inc. LW 71% N/A N/A News Corp Class A NWSA 93% 73% N/A CVS Health Corp. CVS 75% 61% 67% Source: FactSet Click on the tickers for more about each company or index.
News Corp
NWSA
is on the list. The company owns Dow Jones, which in turn owns MarketWatch.Here’s the list again, with ratings and consensus price-target information:
Company Ticker Share “buy” ratings Oct. 2 price Consensus price target Implied 12-month upside potential SolarEdge Technologies Inc. SEDG 74% $122.56 $268.77 119% AES Corp. AES 79% $14.16 $25.60 81% Insulet Corp. PODD 68% $165.04 $279.00 69% United Airlines Holdings Inc. UAL 71% $41.62 $69.52 67% Alaska Air Group Inc. ALK 87% $36.83 $61.31 66% Tapestry Inc. TPR 75% $28.58 $46.21 62% Albemarle Corp. ALB 81% $162.41 $259.95 60% Delta Air Lines Inc. DAL 95% $36.45 $58.11 59% Alexandria Real Estate Equities Inc. ARE 100% $98.18 $149.45 52% Las Vegas Sands Corp. LVS 72% $45.70 $68.15 49% Paycom Software Inc. PAYC 77% $260.04 $384.89 48% PayPal Holdings Inc. PYPL 69% $58.56 $86.38 48% SBA Communications Corp. Class A SBAC 68% $198.24 $276.69 40% Advanced Micro Devices Inc. AMD 74% $103.27 $143.07 39% LKQ Corp. LKQ 82% $49.13 $67.13 37% Charles Schwab Corp. SCHW 77% $53.55 $72.67 36% PulteGroup Inc. PHM 81% $73.22 $98.60 35% Lamb Weston Holdings Inc. LW 100% $92.23 $123.50 34% News Corp Class A NWSA 78% $20.00 $26.42 32% CVS Health Corp. CVS 77% $69.69 $90.88 30% Source: FactSet A year may actually be a short period for a long-term investor, but 12-month price targets are the norm for analysts working for brokerage companies.
Don’t miss: This fund shows that industry expertise can help you make a lot of money in the stock market
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These 20 growth stocks are worth considering on a pullback, says Citi
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Citi has released a list of 20 large-cap growth stocks that it says present opportunities in the event of a pullback.
“Our call since early summer has been to hold Growth and look to buy on pullbacks,” Citi analyst Scott Chronert said in a note released Monday, adding that Citi has had a tactical preference for cyclicals. “However, on the heels of the strong Cyclicals surge during June and July, and our upwardly revised S&P 500 target of 4600, the messaging has been to buy on pullbacks more broadly,” he wrote.
Citi also notes that the Russell 1000 Growth Index
RLG
has sold off more than 6% from its mid-July high, although two-thirds of the stocks in the index are down 10% or more, with one-third down more than 20%. “This sets up for interesting intermediate to long-term stock selection opportunities,” Chronert said.Related: Preorders for the iPhone 15 have begun, and here’s a sign they’ve been ‘solid’
The analyst acknowledged that there is still a risk of economic softening ahead, if not a recession. “Yet, the argument that Growth stocks can show fundamental resilience during periods of broader economic weakening is a theme that we have considered for several years now,” he said.
Set against this backdrop, the analyst firm has compiled a tech-heavy list of 20 stocks that have a buy rating from Citi, have at least 75% of market cap assigned to growth, according to Russell, and have experienced a decline of 10% or more from year-to-date highs since March 31. Other common characteristics of the stocks include consensus estimates of free cash flow per share above March 31 levels and free cash flow per share within or above market-implied five-year-forward estimates.
Tech heavyweights Apple Inc.
AAPL,
+0.74%
and NVIDIA Corp.
NVDA,
+1.47%
are on the list, along with Pinterest Inc.
PINS,
-2.47% ,
Lam Research Corp.
LRCX,
+0.24% ,
Teradata Corp.
TDC,
+0.36% ,
Datadog Inc.
DDOG,
+0.09% ,
MongoDB Inc.
MDB,
-0.73% ,
HubSpot Inc.
HUBS,
+0.18%
and KLA Corp.
KLAC,
+0.79% .
The other stocks cited by Citi are Lockheed Martin Corp.
LMT,
-0.18% ,
DraftKings Inc.
DKNG,
-1.44% ,
Las Vegas Sands Corp.
LVS,
-0.98% ,
Chipotle Mexican Grill Inc.
CMG,
-0.85% ,
Netflix Inc.
NFLX,
+1.31% ,
TKO Group Holdings Inc.
TKO,
-1.93% ,
Rockwell Automation Inc.
ROK,
+1.09%
and Paycom Software Inc.
PAYC,
+0.45% ,
and healthcare stocks Bruker Corp.
BRKR,
+1.04% ,
Insulet Corp.
PODD,
-0.66%
and Intuitive Surgical Inc.
ISRG,
+1.75% .Related: Will Nvidia stock be like Apple or Cisco in the AI era?
Shares of Apple, which recently launched its iPhone 15, are down 5.5% in the last three months. Shares of chip maker NVIDIA are up 2.8% over the same period, while Lockheed Martin is down 8.9% and DraftKings is up 8.6%. Las Vegas Sands is down 21.8% and Chipotle is down 8.8%, while Netflix is down 7.8%.
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Nvidia, Lowe’s, Dollar Tree, and More to Watch
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The majority of second-quarter earnings season is over, with a handful of major technology and retail names left to report this week. Economists will be focused on any news from an annual gathering of monetary policy thinkers and practitioners in Jackson Hole, Wyoming.
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Home Depot, Target, and More to Watch This Week
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Home Depot, Target, Cisco, Deere, Walmart, and More Stocks to Watch This Week
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Want companies to lower their prices? Stop buying stuff from them.
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The thing that will make companies lower prices is if consumers stop complaining about paying more for the things they need and want, and actually start refusing to buy them.
As the U.S. corporate earnings-reporting season progresses, with earnings from major retailers Walmart Inc.
WMT,
+0.59% ,
Target Corp.
TGT,
+0.10%
and Home Depot Inc.
HD,
+0.52%
on tap next week, investors can get a ground-floor view of how consumer demand may have been hurt, or not, by higher prices, and what the companies plan to do, or not do, about it.This dynamic of how consumers adjust their spending habits when prices change is referred to by economists as the price elasticity of demand.
“ For companies to cut prices, ‘you have to have the consumer go on strike, and they’re not there yet.’”
Those who trust companies will choose to ratchet down prices on their own, or at least not raise them because the rise in input costs has been slowing, haven’t been listening to what the many companies have told analysts on their post-earnings-report conference calls.
Read: U.S. inflation eases again, PCE shows. Prices rise at slowest pace in almost two years.
Kraft Heinz Co.
KHC,
+0.47%
acknowledged after its second-quarter report that its relatively higher prices have hurt demand, but not by enough for the food and condiments company to consider cutting prices.Colgate-Palmolive Co.
CL,
+0.81%
said it will continue to raise prices, even as inflation slows and selling volume declines, as the consumer-products company continues to be laser focused on boosting margins and profits.And while PepsiCo Inc.
PEP,
+0.16%
was worried that elasticities would increase, given how its lower-income customers were being particularly pressured by inflation, the beverage and snack giant reported strong results as it witnessed “better elasticities” in most of the markets in which it operated.“Obviously, there is still carryover pricing, and I don’t think we’ll do anything different than our normal cycles on pricing in the balance of the year,” PepsiCo Chief Financial Officer Hugh Johnston told analysts, according to an AlphaSense transcript.
Basically, as MarketWatch has reported, so-called greedflation is alive and well.
Jamie Cox, managing partner for Harris Financial Group, said as long as the job market stays strong, as it is now, corporate greed will continue to pay off.
“If something is more expensive, and you have a job, you’ll complain about it, but you won’t substitute it for something cheaper,” Cox said. For companies to cut prices, “you have to have the consumer go on strike, and they’re not there yet,” Cox added.
“ ‘At some point, people are going to say, “All right — enough.” ’ ”
The reason elasticity is so important in the current environment is that, as long as consumers continue to pay the higher prices companies are charging, inflation will remain stubbornly high, making it, in turn, more likely that the Federal Reserve will continue to raise interest rates or, at the very least, not lower them.
But the longer interest rates stay high enough to crimp economic growth, the more likely the stock market will reverse lower as recession fears rise.
“At some point, people are going to say, ‘All right — enough,’ ” said Paul Nolte, senior wealth manager and market strategist at Murphy & Sylvest Wealth Management. “But we just haven’t seen that yet.”
What is elasticity?
Economists use the term “price elasticity of demand” to refer to the way in which consumers adjust their spending habits when prices change.
“Elasticity tries to measure how much more producers will want to produce if prices rise, and how much more consumers will want to buy if prices fall,” explained Bill Adams, chief economist at Comerica.
Elasticity often depends on the type of product a company sells.
For example, consumer-discretionary-goods companies that sell products and services that people want will often experience greater price elasticity than consumer-staples companies that sell things that people need, such as groceries and prescription drugs.
But even for needs, consumers often still have a choice, as less expensive generic, or private-label, alternatives may be available.
Andre Schulten, chief financial officer of consumer-staples maker Procter & Gamble Co.
PG,
+0.58% ,
which recently beat earnings expectations as it continued to raise prices, telling analysts that, while there was “some trading into private label,” the overall market share of private-label products was unchanged for the year.As Harris Financial’s Cox said, consumers may be complaining about higher prices, but they aren’t yet desperate enough to stop buying.
The Federal Reserve’s latest Beige Book economic survey stated that business contacts in some districts had observed a “reluctance” to raise prices as consumers appeared to have grown more sensitive to prices, but other districts reported “solid demand” allowed companies to maintain prices and profitability.
That’s likely why companies and analysts have become less concerned about price elasticity. Based on a FactSet analysis, mentions of the word “elasticity” in press releases and conference calls of S&P 500 companies
SPX
increased as inflation and interest rates started surging in early 2022 through the end of the year.With inflation trends softening this year, the Fed took a brief pause in raising rates in June, helping fuel further stock-market gains, before raising rates again in July.
Mentions of the word elasticity in earnings press releases and conference-call transcripts of S&P 500 companies.
FactSet
As the chart shows, “elasticity” popped up in more than 55% of earnings releases and conference calls in mid-2022, but with the second-quarter 2023 earnings-reporting season more than half over, mentions had dropped to about 20%.
Perhaps that will pick up, as retailers, especially those catering to lower-income customers — recall the PepsiCo comment — assess the demand impact of continued price increases.
Meanwhile, the branded-foods company Conagra Brands Inc.
CAG,
+0.71% ,
whose wide-ranging food brands including Birds Eye, Duncan Hines, Hunt’s, Orville Redenbacher’s and Slim Jim, were starting to see the emergence of a different dynamic.Chief Executive Sean Connolly said consumers were shifting behavior in some categories as prices remained high. Rather than trade down to lower-priced alternatives, he noticed some consumers buying fewer items overall, “more of a hunkering down than a trading down.”
That’s exactly the kind of consumer behavior that is needed, if companies are to stop feeding into the greedflation phenomenon and to start pulling back on prices.
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Lowe’s stock falls after earnings beat expectations but full-year guidance was cut
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Shares of Lowe’s Companies Inc. dropped Tuesday, after the home-improvement retailer beat fiscal first-quarter profit and sales expectations but cut its full-year outlook, citing lower demand for discretionary items.
Net income for the quarter to May 5 was $2.26 billion, or $3.77 a share, after income of $2.33 billion, or $3.51 a share, in the same period a year ago. Net income fell while earnings per share increased as the number of shares outstanding used to calculate EPS dropped 9.8% to 597 million.
Excluding nonrecurring items, such as an asset-sale gain, adjusted EPS of $3.67 beat the FactSet consensus of $3.44.
Total sales declined 5.5% to $22.35 billion, above the FactSet consensus of $21.60 billion, while the same-store sales decline of 4.3% missed expectations for a 3.4% decline.
Cost of sales fell less than sales, down 5.1% to $14.82 billion, as gross margin contracted to 33.7% from 34.0%. The value of merchandise inventory as of May 5 fell 3.5% from a year ago to $19.52 billion.
The stock
LOW,
-1.51%
shed 1.0% ahead of the open, but pared earlier premarket losses of as much as 3.4%.During the quarter, Lowe’s said it spent $2.1 billion to repurchase 10.6 million shares and paid out $633 million in dividends.
“We are pleased with the performance of our business despite record lumber deflation and unfavorable spring weather,” said Chief Executive Officer Marvin Ellison. “Although we delivered positive comparable sales in Pro and online for the first quarter, we are updating our full-year outlook to reflect softer-than-expected consumer demand for discretionary purchases.”
For fiscal 2023, the company lowered its guidance ranges for adjusted EPS to $13.20 to $13.60 from $13.60 to $14.00 and sales to $87 billion to $89 billion from $88 billion to $90 billion. The outlook for same-store sales was revised to down 2% to down 4% from flat to down 2%.
Meanwhile, Wall Street’s full-year estimates were within the lowered guidance ranges, as the FactSet consensus for EPS was $13.56. The estimate for sales was $88.36 billion and for same-store sales was a decline of 2.2%.
Lowe’s results came less than a week after rival Home Depot Inc.
HD,
-0.08%
reported a first-quarter profit beat — but sales missed expectations. Home Depot also lowered its full-year outlook.The stock has gained 2.0% year to date through Monday, while Home Depot shares have dropped 8.0% and the S&P 500 index
SPX,
+0.02%
has advanced 9.2%.[ad_2]
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How pickleball could help save America’s malls
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When Andrew Pessano was looking to create a state-of-the-art indoor pickleball facility in southern New Jersey and take advantage of the surging interest in the sport, he considered building it from scratch. But he and his partners realized it would take at least two years and likely cost well over $1 million.
So, Pessano and his team found a different way to achieve their goal: They leased a vacant big-box space — formerly home to a Burlington
BURL,
+0.44%
store, in fact — and turned it into Proshot Pickleball, a membership facility replete with eight cushioned courts, viewing decks, a pro shop and a players lounge.Pessano says that since opening in mid-February, he’s already signed up more than 300 paid members. “The first couple of months we’re busy, busy,” he adds.
Proshot Pickleball could be something of a model for the future of what is often described as the fastest-growing sport in the country; a game that shares elements with tennis, ping-pong and badminton. In short, pickleball could soon be coming to that vacant space in your local mall — or to that abandoned big-box store. (Consider all those soon-to-be-empty Bed Bath & Beyond locations.)
“Pickleball ‘will help America’s malls to become the social hub they once were.’”
The trend is already happening: A recent retail-outlook report from JLL, a company that tracks the commercial real-estate market, points to pickleball facilities in locations ranging from a former Saks Off Fifth store in Connecticut, to a shuttered Belk department-store location in Georgia.
Pickleball “court owners are targeting malls for expansion,” says the report.
Of course, no one is saying that pickleball won’t continue to be played in parks and other public spaces, or even people’s driveways. Inherent in the game’s appeal, say fans, is that it can be played just about anywhere. But there are notable factors driving the move into malls and other retail locations.
Begin with that surging interest in pickleball. Nearly 9 million Americans are now playing the game, the Sports & Fitness Industry Association reports — an astounding year-over-year increase of 85.7%.
All those players need places to play, but the lack of available public court space in many cities and towns has led to all sorts of skirmishes, with issues arising when players use tennis facilities or take up space in playgrounds. As one parent complained about the pickleballers when the turf war erupted at a New York City playground: “It’s not a coexistence, it’s a complete and utter takeover.”
See also: As pickleball players spend billions on the sport, they run into conflicts and controversy
That leaves more room for operators of private facilities, like the pickleball court owners that JLL cites, to enter the picture — and many concepts, even chains, are starting to emerge to address the demand. But where should they go? Again, building from scratch can take a lot of money, and time.
“Nearly 9 million million Americans are now playing pickleball, the Sports & Fitness Industry Association reports — an astounding year-over-year increase of 85.7%.”
Meanwhile, mall operators and landlords of other retail spaces, such as big-box stores, are continually looking for new concepts to bring into their spaces, especially as brick-and-mortar retail stores fight to stay relevant and afloat at a time when online shopping has become the norm for many Americans.
In turn, those concepts are more often about “experiences” rather than shopping, says James Cook, a research director at JLL. Think museums, golf simulators and pickleball.
It’s about redefining the retail landscape, Cook says. “The idea is this is something new and unique,” he adds of these emerging types of mall/big-box tenants, including pickleball facilities.
Mike Leigh, author of “Zen and the Art of Pickleball,” sees an especial logic to pickleball in malls. These retails spaces are all about bringing people together, something that is all too easily forgotten in a point-and-click world of online shopping. And pickleball is a game that’s inherently social because of its close-up nature.
So the two make a natural combo, Leigh says: Pickleball “will help America’s malls to become the social hub they once were.”
CityPickle, a New York City-based operator of pickleball facilities, opened a pop-up venue at the Hudson Yards development last year.
CityPickle
Still, there are plenty of arguments to the contrary, so this is not a one-size-fits-all solution.
America’s malls and other retail hubs have their share of empty spaces, but the situation may not be as dire as it seems, Cook says. The points to the current retail vacancy rate of 4.2% being “at historic lows,” noting that there’s been considerable recovery since the darkest days of the pandemic.
Moreover, he says, higher-end malls are doing especially well — and it’s those spaces that tend to be a good fit for experiential concepts like pickleball. In other words, these malls may like the idea, but they aren’t necessarily begging for tenants.
Plus, Cook says pickleball facilities can need lots of space — concepts often have a food-and-drink component for pre- and post-game socializing. And facility operators like to have outdoor space, if possible, for the warmer months. Such requirements can pose challenges in a traditional mall setup, he says.
“I think [pickleball] only works in some specific instances,” he says.
Pessano, of South Jersey’s Proshot Pickleball, points to another issue: If the space’s support columns aren’t situated far enough apart from one another, it will make it difficult to have enough courts to make for a viable business. And the ceiling height can’t be too low, either, he adds.
These discouraging realities notwithstanding, it appears pickleball operators will continue to consider abandoned mall spaces and big-box stores as a good option to create much-needed court space. Take CityPickle, a private operator that already set up a pop-up facility in New York City’s Hudson Yards mixed-use development in the past year, and is looking to establish permanent court spaces in the Big Apple and elsewhere.
CityPickle founders Mary Cannon and Erica Desai say they are considering abandoned retail locations as possibilities. They like the open space these places provide, and they say that landlords appreciate having tenants that bring the kind of buzz and energy that a pickleball facility offers.
“It makes so much sense,” says Cannon.
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Home Depot stock falls after sales miss and lowered outlook, citing lumber deflation and bad weather
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Shares of Home Depot Inc. dropped Tuesday, after the home improvement retail giant reported fiscal first-quarter profit that topped expectations but sales that fell short, and it cut the full-year outlook, citing lumber deflation and bad weather.
Net income for the quarter to April 30 fell to $3.87 billion, or $3.82 a share, from $4.32 billion, or $4.09 a share, in the same period a year ago. That topped the FactSet consensus for earnings per share of $3.80.
Sales declined 4.2% to $37.26 billion, well below the FactSet consensus of $38.31 billion.
“Our sales for the quarter were below our expectations primarily driven by lumber deflation and unfavorable weather, particularly in our Western division as extreme weather in California disproportionately impacted our results,” said Chief Executive Officer Ted Decker.
Overall same-store sales fell 4.5% to miss the FactSet consensus for a 1.6% decline, with same-store sales in the U.S. falling 4.6%.
The stock sank 3.6% toward a seven-month low in premarket trading.
“Given the negative impact to first quarter sales from lumber deflation and weather, further softening of demand relative to our expectations, and continued uncertainty regarding consumer demand, we are updating our guidance to reflect a range of potential outcomes,” said Chief Financial Officer Richard McPhail.
For fiscal 2023, the company cut its EPS outlook to a decline of between 7% and 13% from a decline in the mid-single digit percentage range, and lowered its sales outlook to a decline of between 2% and 5% from approximately flat.
The stock has dropped 10.2% over the past three months through Monday, while the Dow Jones Industrial Average
DJIA,
+0.14%
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