Retailers Running Out of Gas?

You'd be hard pressed to find a stock that wasn't in the red this day after Memorial Day. News headlines blame disappointing May sales from Motley Fool Inside Value pick Wal-Mart (NYSE: WMT  ) -- as well as continued worries about oil prices -- for a pervasive degree of negativity that is haunting stocks, including some of the big names in retail. (Oh, and a drop in consumer confidence and the weakening dollar probably didn't help.) Is it time to run screaming from retail?

I was on vacation last week, only to return today and find many of the stocks that I tend to watch -- such as popular retailers -- in the red on no news. Falling stocks included such high-profile names as Abercrombie & Fitch (NYSE: ANF  ) , Urban Outfitters (Nasdaq: URBN  ) , Talbots (NYSE: TLB  ) , and Pacific Sunwear (Nasdaq: PSUN  ) . You probably have your own list of stocks in the red today.

Of course, it didn't take long to figure out that the likely culprit was Wal-Mart's downbeat sales data for May. The discounter's May sales came in light, and the company blamed consumer anxiety over high gas and utility prices, as well as signs that folks are currently focused on more paycheck-to-paycheck shopping cycles --spikes in spending around the first and fifteenth of every month.

It doesn't really make sense to beat up on everybody when the demographic in question is the low-income one. Many say their shopping decisions would impact discount retailers like Wal-Mart and Target (NYSE: TGT  ) the most, but let's face it, the market often doesn't make much sense when it's exhibiting such a classic knee-jerk reaction. Furthermore, all the other negative macroeconomic data could theoretically make a case for spooked consumers with a tighter grasp on their purse strings.

On days like this, when positive sentiment is lacking and everybody seems to be obsessing over macroeconomic trends, sometimes it's tough to be a buy-and-hold investor. It's tempting to take a cue from lemmings and go with the idea that if everybody believes the sky is falling, it probably will, and that it's best to cut and run for cover.

When the news sounds so dire, take a deep breath and remember that this too shall pass. I certainly like some of the companies I listed above more than others (and some I don't like at all), but the point is, for those of us who have done our due diligence on our investments, days like today remind us that it's wise to disregard the hype and the histrionics and focus instead on quality and long-term outlook.

After all, any long-term stock watcher knows that days like this one are plentiful -- in fact, today's pessimism reminds me of one of my Foolish colleague Seth Jayson's pieces from last August, "Ignore the Retail Doomsayers." Gas prices, consumer confidence, scary macroeconomic trends ... yep, we've been here before, Fools, and we'll probably be here again.

Pacific Sunwear is aMotley Fool Stock Advisorselection. To find out what other companies David and Tom Gardner have recommended for the service, click here for a 30-day free trial.

Alyce Lomax owns shares of Urban Outfitters, but none of the other companies mentioned. The Fool has a disclosure policy.


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