These 2 companies could be bucking the devastating retail trend

Andy Swan
Andy Swan
Source: Getty Images/ Mike Mozart-Flickr

Andy Swan is the co-founder of LikeFolio, a company that provides social data for investors.

Malls are dead!” “Amazon is eating the world!” We’ve all seen the headlines, and for the most part, they’re right. But some of the best opportunities often come when the whole market is betting against a specific sector.

We’ve found two retailers that could be bucking the devastating retail trend. One is midway through a turnaround, and the other is showing a similar rise in consumer enthusiasm as its stock gets beaten down to new lows. This consumer-data focus has allowed us to catch some really nice shifts and turnarounds in the past, especially on retail names.

At LikeFolio, we use data gathered from social media to measure trends and shifts in consumer behavior. Our most powerful metric, “Purchase Intent Mentions,” looks at the number of people tweeting they’re spending money with a company. This is the metric that Georgetown University used to determine that social data predicts unexpected component of sales that analysts miss, as showcased by our successful prediction of Chipotle’s failed turnaround.

But it’s not just burrito sales that can be tracked using social data. In fact, this kind of consumer trend monitoring can be extremely predictive for consumer-facing companies like fashion brands and other retailers.

So, on the heels of Abercrombie’s disastrous day, we thought it would be fun to look at two companies that are bucking the trend and actually seeing good consumer trend metrics coming out of our social data.

Skechers on the rise

After Skechers rose more than 15% in June, and almost 50% from the lows of last October, we wanted to look to see if consumer data from social media had predicted Skechers’ (SKX) turnaround. More importantly, we want to know if the current price of $28 is justified and if there could be more in the tank of this rally.

To find out, we turn to LikeFolio’s purchase intent data to see if consumers are continuing to buy what Skechers is selling:

Source: LikeFolio

As you can see from the chart above, Skechers has seen a nice, consistent increase in its quarterly results each of the past two years. What we really like about this chart comes from comparing the last two years’ Q2 numbers circled in red. Take note that the yet-to-be-reported Q2 of 2017 is showing significantly greater traction with consumers than Q2 of 2016. We’ll be eager to see what kind of revenue numbers the company reports in its earnings release next week.

Another interesting note from the Skechers chart is circled in blue — the Q3 2016 purchase intent mentions. This all-time-high in purchase intent mentions was yet to be reported when the stock hit multi-year lows at the beginning of October. Since then, the stock has risen almost 50% and multiple analysts have upgraded the company as sales reports started to come in that surprised analysts with the amount of growth the company was seeing.

Just as Wall Street was abandoning the stock, consumers were beginning to come back to the stores for new designs they loved.

That kind of divergence is often a powerful opportunity — when the social data from Main Street is showing growth that hasn’t yet been digested by the experts on Wall Street… a perfect description of what we’re seeing in the second company we’re looking at.

Is Express ready for a turnaround?

Like Skechers in the fall of 2016, it’s fair to say Express (EXPR) is universally hated by most of Wall Street. The stock is trading near all-time lows at $6, and only a handful of analysts recommend it as anything better than a “neutral” pick.

But their pessimism might be an opportunity for savvy investors paying attention to social-data trends coming from consumers on Main Street. In fact, Express could be in the middle of setting up a divergence opportunity very similar to the one that led to the big turnaround that Skechers saw last year. We are seeing good signals that shoppers have liked what they have seen out of Express so far in 2017, both online and in stores. Unlike Abercrombie or GAP, Express is seeing a noticeable increase in both mention volume and consumer happiness — the hallmarks of a potential positive turnaround.

Take a look at this chart of overall mentions of Express brands and products over the last 5 years, mapped along with the company’s stock price.

Source: LikeFolio

The divergence opportunity for Express is highlighted with the red circle. You’ll notice that mentions of Express brands and products are actually on the rise compared to prior years, even as the stock falls to fresh lows. We think this is likely a case of the baby being thrown out with the bath water, as funds avoid the retail sector all together.

While certainly a very risky stock here, we will be keeping a very close eye on Express for signs of life over the remainder of 2017. Like with Skechers, consumers could be beating Wall Street to the punch once again.

More from Andy Swan:

The Chipotle turnaround may officially be over

Here’s evidence the Weight Watchers comeback is truly underway 

How we predicted Chipotle’s warning to investors — and what’s coming next

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