For years now, I’ve been writing here in Insights & Indictments about America’s consumers, our consumer-driven economy, and the impact of the Internet on bricks-and-mortar stores and retail in general… And I’ve made a bunch of predictions.
Surprisingly or not, I’ve been right about almost every single one.
But being right is one thing, making money by looking into the future is something altogether different. If I dare say so myself, it’s much better.
That’s what I want to focus on today. Not about being right (well, maybe a little), but on how to make money on big trends.
If you’ve been following this column (or, even better, following my Zenith Trading Circle recommendations), you know exactly what I mean. Following my advice means you’ve cashed in on all those recommendations.
Claire’s is a Perfect Example of Retail’s Impending Doom
Almost every day there’s an article about how bricks-and-mortar retail stores are going out of business.
This week, The Washington Post had the headline story “Claire’s is ‘a complete train wreck'”.
It’s about how the once high-margin, super-profitable retailer of pre-teen and teen accessories was taken private in 2007 by Apollo Global Management LLC (NYSE:APO), which saddled the company with more than $2.17 billion in the process. Claire’s is looking back at eleven straight quarters of declining sales and, as one of their sources states, “at one time was the most profitable chain in the business, [but] has become a complete train wreck.”
That’s not surprising. I’ve been writing here about leveraged buyouts for years (most recently about Neiman Marcus), and how some of these once high-margin, attractive retailers were loaded-up and leveraged with debt by their buyers. In Neiman’s case, with $5 billion worth of debt, by buyers who either didn’t see where retail was headed or didn’t care.
In fact, I’ve recommended a couple of trades in Zenith to position ourselves to profit off the fortunes or the demise of Nordstrom Inc. (NYSE:JWN), which is considering selling itself to a private equity buyer.
Nordstrom’s stock could jump higher if a buyer steps up and makes an offer for the company, or its stock could collapse if the beating it’s taken along with other retailers continues. Either way, we’re set up to make a profit on the stock; sometimes you can have it both ways.
Here’s a glimpse into a couple other trades that panned out well behind Zenith’s closed doors.
We took a 300% gain in April out of GoPro Inc. (NASDAQ:GPRO) when talk of someone finding it attractive and buying it were just stupid rumors. I’ve followed the stock for a while and when it took a tumble we scored on a trade we put on in January.
Then in May we cashed in on a 100% gain on a Fossil Group, Inc. (NASDAQ:FOSL) trade, a 25% gain on an Avon Products, Inc. (NYSE:AVP) trade, another 150% gain on AVP, and a 100% and 116.67% gains on Chico’s FAS, Inc. (NYSE:CHS).
It was a good month.
The newspapers and financial news media are now all over what we’ve been talking about here for years.
David Silverman, a retail analyst at Fitch Ratings, recently deemed Claire’s at risk of filing for bankruptcy and commented “Claire’s – which is about impulse-driven purchases – has become a victim of changing mall traffic trends.” Claire’s apparently did not respond to a request for comment when Washington Post reached out to it.
You don’t have to be able to read between the lines of a comment like that to figure out how to play what’s happening. I’m here to tell you.
I’ve also written here about how America’s malls are taking it on the chin and I recommended betting against some of the big mall-owner, operator REITS. As predicted, they’ve been going down, too.
Claire’s closed 150 stores in 2016, and they’re far from done. The Washington Post article points to changing trends and that, after an almost six-decade solid run, Claire’s is facing off-price and fast fashion competition across the board.
And, of course, there’s “the Amazon effect.”
How to Ride This Gravy Train Into Serious Wealth
Fundamentally, the Internet has changed everything about retail, with Amazon.Com Inc. (NASDAQ:AMZN) simply being the 600-pound gorilla in the room.
I reserve a lot of space here to talk about Amazon and which industries and traditional bricks-and-mortar retailers Amazon and its Internet armies of imitators has beaten down and to death.
But I also tell you how to make money on what the Internet hath wrought.
Besides teeing up a long drive in April, and hitting it out of the park in May in Zenith Trading Circle, we literally scored a record 995% gain on The Kroger Co.’s (NYSE:KR) misfortunes in June when I wrote about changes coming to the grocery business in America. I also wrote about it here, before and after Jeff Bezos’ big move.
By getting ahead of the crowd on understanding what changes are in the works and explaining exactly what the grocery sector was about to run into, we were able to pick on Kroeger and bank big profits.
In fact, we made all of June a month to remember.
Besides our (once again) 995% take on KR, which came on the heels of first taking a 100% gain on the stock dropping, we booked another 25% gain on AVP’s misfortunes after first closing out a 150% gain on our AVP position.
We scored a 100% gain on the FOSL trade I recommended.
And we booked gains of 100%, 116.67% and 324.05% all on CHS.
I’m not usually the kind of guy who says, “I told you so,” but if I was, I’d sure be saying it now.
Okay, I am. You should be reading this column and be in Zenith Trading Circle because this is where the future of companies, of industries, and of stocks is laid out before you like a magic carpet.
These trends are going to continue.