Rags and Riches in Retail

This week brought some thrills and chills to the retail sector, though not all of them were entirely surprising. Tiffany (NYSE: TIF  ) may be sparkling today, but J. Crew's (NYSE: JCG  ) full-year profit warning has made big news, walloping its share price and sending many retailers' prices down, amid fears of a terrible traffic slowdown at stores.

Let's do some window-shopping for retailers that reported quarterly results this week, and consult our Motley Fool CAPS community's feelings on these stocks.

Company

CAPS Rating (out of 5)

Change in Earnings per Share

Revenue Change

Impact on Price

Chico's (NYSE: CHS  )

***

(73%)

(9.6%)

13.5%

Coldwater Creek (Nasdaq: CWTR  )

***

N/A

(3.6%)

6.7%

DSW (NYSE: DSW  )

**

(57.4%)

2.6%

2.2%

Polo Ralph Lauren (NYSE: RL  )

**

47%

21.5%

11.7%

J. Crew

**

23%

15%

(20%)

* Share price data from Yahoo! Finance reflects change in price on day of earnings release; J. Crew share price impact as of this writing.

Ladies first
Judging by the above chart, Chico's results look pretty abysmal -- its same-store sales fell by a whopping 17.5%. However, investors bid the shares up after its quarterly results, because the clothier nonetheless beat expectations. The same goes for Coldwater Creek, although it swung to a quarterly loss.

I find it interesting that our CAPS community rates women's retailers Chico's and Coldwater Creek the highest of the five retailers we're examining here, with three stars apiece. True, Chico's and Coldwater Creek are both tremendously beaten-down stocks, but I'm still not convinced they're getting things back on track.

This CAPS pitch from player jesterjustice may suggest at least part of the rationale for Chico's three-star rating: "Can this go any lower?" Jesterjustice continues, "Chico's proper has pretty lousy merchandise for a demographic that has stopped buying clothing recently, but their subsidiary White House Black Market has great clothes for young, hip people who don't believe the credit crisis affects them."

On the other end of the spectrum, though, there's SAVVYTRADER88, who cites the tough consumer environment and predicts in his pitch, "This is one of many 'specialty' retailers that will experience more pain before year-end."

As for Coldwater Creek, sparkyd1 offered up a ringing endorsement of the company:

This stock is at an all time low, due to a slow-down in retail. However, the company is sound and has a great product, often for boomers (the ones who have the money). They have a good solid balance sheet and I feel will continue to grow as the recession comes to a close.

However, sparkyd1 did share concerns that trouble could be ahead if Coldwater decides to move away from its paper catalogue business.

On the bearish side, though, here's an ominous Coldwater pitch from kimonye: "Retail is dead."

Ouch, don't break my heart.

Big retail surprises
I'm not sure I would have guessed that a huge drop for J. Crew shares, or huge rise for Polo Ralph Lauren, were in the cards this week. But whoever said the market was predictable?

J. Crew may have reported an impressive quarter overall, but that darn uncertain future has everybody concerned. Citing economic rumblings here in the States, the company said that weak customer traffic has given it a hard time pushing ostensibly popular summer items like shorts and T-shirts.

CAPS player KnightTrader1 may have been on the right track in March with this bearish pitch about J. Crew: "High priced retailer going into possible consumer recession."

Polo Ralph Lauren, on the other hand, reported a stellar quarter, though it may have gotten a boost from strong demand in international markets like Europe and a lower tax rate.

Many bullish pitches from CAPS players reflect this one by twelveisdead:

When was the last time you saw Ralph Lauren polos go out of style? Right. You didn't.

Rags or riches?
The consumer slowdown is obviously presenting major headwinds for many -- but not all -- retailers. For long-term investors, the situation presents opportunities to grab unfairly punished stocks at bargain prices, or enjoy a clearer selection of stocks proving their strength even in bad times.

If you'd like to do some deal-hunting among retail stocks, CAPS and its wealth of community data is a great place to start. Happy shopping!

Shop around for related retail Foolishness:

If you're looking for some retail stock ideas, Motley Fool Stock Advisor has a couple for your perusal -- as well as plenty of picks in other industries, too. Take a 30-day free trial and find out what stocks David and Tom Gardner like for the long term.

Alyce Lomax does not own shares of any of the companies mentioned. The Fool has a disclosure policy.


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