In recent weeks, discount retail stores of the likes of TJX Companies (TJX), Burlington Stores (BURL), Kohl’s Corp. (KSS), and Target (TGT) have gotten crushed. Today alone, Target (TGT) fell 2.4%, BURL fell 3.2%, and TJX fell almost 5%. Earlier in the month, these retailers had reached or came close to 52-week highs only to fall in dramatic fashion; some, like TJX, into correction territory (down +10% from highs). These companies are major retail chains focused on discount clothing and home furnishings, so headed into the holiday season, you may expect better performance of these names. But historically, it is a coin flip. They only see positive returns around half the time from now through the rest of the year. Kohl’s (KSS) is the most frequently positive merely at 53.85%; conversely, TGT underperforms the most as it is positive only 41.67%. Again, it is a coin flip so it is hard to say that the holidays necessarily help the stocks. As you can see in the charts below from our Chart Scanner tool, even from a technical standpoint, the picture is not great with these names having fallen through recent support levels.

Like many things in the markets recently, finding a reason for the drop is hard to do. Looking to another major retailer, last week we saw Nordstrom (JWN) drop big on a weak earnings report, but the recent declines in these discount names cannot be blamed on poor earnings—they have yet to report.  Over the course of the next few days, these names’ Q3 reports will begin to roll in. These names typically see worse performance in reaction to their Q3 earnings compared to other periods. In total, these retailers are positive around half the time in the day following earnings, but in response to Q3 earnings, with the exception of BURL, this group is less frequently positive. BURL looks the best rising on average 6.21% for the full day after earnings. The next best is a long way down with Kohl’s (KSS) only rising an average 0.5%. TJX and ROST, on the other hand, typically experience losses.

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