Holiday Retail Review for Southern California

James is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Over the holidays, I visited many different malls in the Southern California area.  The main reason of course was holiday shopping, like everyone else.  But I also used this time to take some notes on major retailers.   Here are some of my observations.

Apple (NASDAQ: AAPL) was the obvious winner in terms of traffic.  Those who predicted Apple's demise clearly did not visit one of their stores this season.  There was a constant line of people waiting to purchase iPads, iPods, and even laptops.  Also, we all know that the new iPhone can't be made fast enough.

Following the stocks largest pullback in years and with products flying off the shelves it might be a good idea to revisit the idea of owning Apple for the long term.  Currently Apple is trading at $544.40, well below its 52 week high of $705.07.  With a P/E of 12.38 and a forward P/E of 9.53 this stock is potentially as cheap as you're going to get in 2013.  With a 5 year expected PEG ratio of 0.53 analysts are pointing to great things in Apple's future.  Conclusion: Long Term Buy and Hold.

A surprise winner in my book this season was J.C. Penney (NYSE: JCP).  I have been paying close attention to the attempted turnaround by Ron Johnson and at first I was skeptical to say the least.  But recently I have seen the new JCP begin to take shape and I like it quite a bit.  The stores appear less cluttered and far more organized.  The products appeal to a younger demographic.  The discounting is real and I've experienced it with my first purchases at JCP in many years.  The Sephora make-up counter was absolutely mobbed and it appears to be a great brand to have in store to attract the younger female demographic.  Finally, the checkout line was long.  Not because they needed more people to work it, but because people were actually buying at JCP again.

Currently JCP is trading at $20.50 and is void of a P/E due to negative earnings.  While still a speculative stock some analysts have actually started to forecast a profit for FY 2013.  If JCP does turn a profit for two consecutive quarters than I will officially call the JCP/Ron Johnson marriage a success.  However, for now, some might be content with putting a little long term speculative money to work in this name while waiting for confirmation.  Conclusion: Speculative Long Term Buy and Hold.

A big loser in my eyes this season was The Gap (NYSE: GPS).  All the stores under The Gap's flag were looking awful.  Help was non-existent.  The lines were at best 3-4 people deep and they had absolutely zero merchandise that appealed to anyone with whom I was shopping.  Speaking to an employee at one of the local Gaps he said that Urban Outfitters (NASDAQ: URBN) was stealing a lot of their thunder and that traffic was slow this season.

Normally if I consider a stock a buy I would put in a few thoughts here that would support that idea.  But I firmly believe that unless The Gap begins to organize some kind of a game plan to deal with the discounting craze and address competitors like Urban Outfitters than this stock should not be owned.  Conclusion: Sell.

Another disappointment was the Microsoft (NASDAQ: MSFT) stores.  With the release of Windows 8, the next couple quarters might benefit, but after that I'm not too excited about their future.  The Surface is officially a flop.  People were not buying them when I visited their store.  Passing by Apple stores you could count over 30 people at any given point.  There were only 5 people in the Microsoft store when I was there.

Microsoft is no longer an innovator.  The stagnant stock price shows that Wall Street knows that very fact.  It has been dead money for over a decade.  It was tough enough for Microsoft when they just had Apple to compete with 10 years ago.  Now they have the Android system to compete with as well.  Look for Microsoft to continue to lose users over the long run as those that grew up with Apple and Google will never spend money on such an antiquated operating system that merely copies others.  Conclusion: Sell.


Lulupoopsalot has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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