It’s been a rough week for Bed Bath & Beyond stocks.
The retailer’s stock has fallen more than 24% since its earnings report on Thursday, which cited slower traffic in stores and rising supply chain-related costs.
With FedEx and Nike reporting similar issues in their latest reports, traders and investors may need to reconsider their retail exposure, Joule Financial chief investment officer Quint Tatro told CNBC’s Trading Nation on Thursday.
“This is very worrying for us, especially the price campaign,” said Tatro. “The magnitude of the decline shows us that traders were significantly ill-positioned for this news.”
“Investors and traders need to search their portfolios, and I think they don’t have to be shy about raising some cash across the board, especially in these sectors,” he said. “We could get setbacks along the way but we think this is a time to get very defensive.”
Investors should indeed be more cautious in retailing, said JC O’Hara, chief market technician at MKM Partners, in the same interview.
“This is a shot over the bow not just for the consumer but for retailers in general for the next quarter or two,” he said. “Problems in the supply chain are small until they get big and we’ve seen Bed Bath & Beyond and the CEO’s comments suggest that this is not a minor problem.”
He looked ahead to another retailer’s report to confirm his concern.
“We’ll get a report from Levi’s next Tuesday, October 5th,” said O’Hara. “I’m very curious to see if you cite supply chain problems, which you are sure to do, but also what about commodity inflation?”
Cotton, which is widely used in Levi Strauss products, is at a decade high after rising nearly 35% this year, O’Hara said.
“This is real inflation. So I wouldn’t be surprised if Levi’s sits on an important support here,” he said. “We could see it drop another 20% after the gains, so that’s my mission statement that I’ll be exploring next week.”
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