February Retail Sales: Same Old Sad Story

It's deja vu all over again. February retail sales arrived Thursday, and the numbers look pretty familiar

For the fifth straight month, retail sales overall took a dip year over year. Saks (NYSE: SKS  ) and the rest of the luxury sector is still in shambles. Teen shoppers are still MIA at American Eagle Outfitters (NYSE: AEO  ) and Abercrombie & Fitch (NYSE: ANF  ) . Families continue to flock to BJ's Wholesale (NYSE: BJ  ) and fellow discounters to stock up on necessities. And The Buckle (NYSE: BKE  ) and Aeropostale (NYSE: ARO  ) wowed again with seemingly out-of-place double-digit positive comps.

Company

February Comps

Saks

(26.0%)

American Eagle

(7.0%)

Aeropostale

11.0%

Abercrombie & Fitch

(30.0%)

The Buckle

21.0%

BJ's Wholesale

8.2%*

Source: Company releases.*Figures exclude fuel sales.

The chart above highlights a few bright spots in the retail report. In reality, though, these are outliers -- the bulk of the retail sector is unfashionably hideous. The aspirational shopper is in hibernation. American Express (NYSE: AXP  ) is bribing some of its customers with $300 payouts to stop shopping and cut up their cards. And fiscal responsibility looks to be the next big thing -- total savings rose to an annualized rate of $546 billion, the highest level on record.

In other words, the consumer is on one giant spending hiatus right now.

Tough times are upon us, and retailers have taken the brunt of the severe economic downturn. In the near term, the rapidly decelerating sales trends could be lethal to financially burdened retailers, particularly ones that have highly leveraged balance sheets. And February's sales are unlikely to be the worst of what's to come.

However, I would like to paint a rosier picture for retail investors with very long investment horizons -- with a big emphasis on "long." Current performance in the retail sector and fear of what's to come has left most retailers lingering at prices that would put any clearance rack to shame. Right now, investors should sift through these retailers and select those that are financially sturdy and possess resilient brand power.

Keep in mind that many retailers are in a slump for more reasons than simply the struggling economy, and so they may not recover even when the economy turns around. However, many retail stocks are positioned to make great comebacks when consumers start trekking back to malls and shopping centers.

Shop wisely, Fools.

Browsing for more retail Foolishness?

Fool Contributor Kristin Graham owns shares of American Eagle Outfitters. American Express is a Motley Fool Inside Value selection. The Fool owns shares of American Express. Try any of our Foolish newsletters today, free for 30 days. The Fool has a disclosure policy.


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  • Report this Comment On April 15, 2009, at 12:14 AM, RJMarch wrote:

    What’s Wrong With Retail

    There is hardly a day goes by in the last few months that we have not had news about the down turn of the retail sales across the country. With a few exceptions all retail establishments are complaining about low sales volumes.

    Until recently I simply though like everyone else it was because people where not buying at this time. However, my wife has given me information recently that leads me to believe otherwise, let me explain.

    My wife is a “Sales Associate” for Macy’s Department Stores in Washington State and has worked for them over two years now. We are both in our 50’s and of the generation that grew up with the idealist notions of “Miracle on 34th Street”, and that customer service rules.

    For the last three to five month’s however we have learned that “credit” rules! She has been badger and threatened to the point of tears because she does not secure enough credit applications for the Macy’s credit card. She has been told to deceive customers and tell them that it is a “rewards card”, as apposed to the 25% credit card that it is. As policy Macy’s has a credit quota, each associate must secure so many credit applications to maintain good standing.

    It would appear retailers have lost their way and want to be banks rather then retail outlets for products and services.

    This of course is at a time when all financial advisors you see on television are advising consumers to stop using their credit cards, and to seek out those cards with the lowest possible rate, certainly not the 25% rate that Macy’s charges, regardless of a persons credit standing

    I personally find this appalling and encourage my wife to seek other employment with an organization that will appreciate her customer service and sales skills without the overly aggressive consumer credit policies.

    In addition I am committed to insuring Macy’s as a retailer will never again receive a penny of my earnings.

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