6 Famous Retail Stocks to Sell in the Next Rally

Big Names, Big Losses

The market experienced its best session in almost two months on Tuesday on stronger-than-expected economic data. Retail stocks outperformed on better-than-expected May retail sales and strong earnings from electronics retailer Best Buy (NYSE: BBY). But, oh, how quickly things can change. Today, the Dow Jones Industrial Average plunged almost 180 points as unrest in Greece threatened to further destabilize global financial markets. And retail stocks suffered with the rest of them.

Taking a step back, the retail sales number showed a 0.2% decline last month, the first drop recorded in nearly a year, but it was significantly better than the 0.5% many analysts had feared. I think investors need to be especially choosy when investing in this sector. For instance, while Best Buy had its day in the sun yesterday, I would not recommend this retail stock, which is down 12% year-to-date and 22% in the last 12 months. And BBY isn�t the only retail stock that has delivered lackluster performance as of late. I�ve put together a list of some of the worst offenders. Put these famous retailers on you list of stocks to sell into the next rally.

    Retail Stock to Sell #1 – Kohl’s Corp. (KSS)

Family-oriented department store owner Kohl�s Corp. (NYSE: KSS) offers apparel, footwear and accessories, as well as home products to its customers in 49 states. The company operates nearly 1,100 stores and offers online shopping as well.

Recently, KSS stock has faltered, dropping 12% since mid-May. Despite strong gains earlier this spring, KSS stock is still down 8% year-to-date. With a 52-week range of $44.07 to $58, KSS is an overweight retail stock worth selling.

    Retail Stock to Sell #2 – Target Corp. (TGT)

Target Corp. (NYSE: TGT) operates general merchandise stores, as well as SuperTarget stores, which carry a full line of food products. The company also offers Target branded credit cards and debit cards to its customers.

Year-to-date, TGT stock is down 23%, compared a gain of 2% for the Dow Jones Industrial Average. Despite strong gains toward the end of 2010, TGT stock is still down 13% overall in the last 12 months. Target does offer a dividend, but at just 2.6%, it hasn�t placated shareholders during this skid. Sell this stock as it trades just above its 52-week low of $46.51.

    Retail Stock to Sell #3 – Home Depot (HD)

Home improvement retailer Home Depot (NYSE: HD) sells an assortment of building materials, home improvement and lawn and garden products, and provides a number of services to its customers. In 2010, Home Depot operates over 2,200 stores in the United States, Canada, Mexico and China.

Since mid-April, HD stock has tumbled 11%. In its last income statement, HD posted 0% quarterly revenue growth. The 25-cent quarterly dividend that HD doles out has not reassured any shareholders who are watching their investment shrink.

    Retail Stock to Sell #4 – Lowe’s Companies (LOW)

Another home improvement retailer making the list of stocks to sell is Lowe�s Companies (NYSE: LOW), which is also the biggest competitor of Home Depot. Lowe�s operates more than 1,700 stores in the United States and Canada.

In the last month alone, LOW stock has declined 14%. Despite strong gains at the start the year, LOW stock is down 12% overall for 2011. More unpleasant numbers can be found in LOW�s last income statement. The company reported quarterly revenue growth of -2% and quarterly earnings growth of -6%, year-over-year.

    Retail Stock to Sell #5 – Staples Inc. (SPLS)

Office products company Staples Inc. (NASDAQ: SPLS) operates in 26 countries throughout North America, Europe, Australia, South America and Asia. The retail company is split into three business segments: North American Delivery, North American Retail and International Operations.

In the last 12 months, SPLS stock has dropped 31%, compared to gains by the broader markets. Even worse, SPLS is down 36% year-to-date. Shareholders took a drastic hit on May 17, when the stock dropped 15% in just one day. SPLS is trading just above its 52-week low of $14.75.

Retail Stock to Sell #6 – Gap Inc. (GPS)

Rounding out the list of stocks to sell is apparel retailer Gap Inc. (NYSE: GPS). The company offers clothing, accessories and personal care products for men, women, children and babies under the Gap, Old Navy, Banana Republic, Piperlime and Athleta brands.

Despite strong gains into May, GPS stock has suffered a drop of 21% year-to-date. In the last month, GPS stock is down 24% thanks in part to a 17% drop on May 19. Analysts are also projecting a drop of 7 cents in EPS this quarter, compared to this quarter last year. Sell this foundering fashion stock above its 52-week low of $16.62.