Is retail showing signs of life, or are we witnessing a shuffling, reanimated semblance? Appropriately enough for the Halloween season, October's retail sales data seemed to harbor more than a few "zombies."
Overall, the entire sector posted a 2.2% increase in sales, which certainly seems quite lively. Data from researcher Retail Metrics showed the best month for retail sales since April 2008. However, that number should be compared to October 2008, when retail sales fell 3.5%, as it became clear the economy was in serious crisis mode. So let's just say it wasn't too hard for the sector to show a year-over-year improvement.
Overall, discounters were the bright spot, while teen retail had a few dead zones. Let's look at a few of the results:
|
Company
|
CAPS Rating (out of 5)
|
October Comps
|
October Net Sales
|
|
Costco (Nasdaq: COST )
|
****
|
5.0%
|
7.0%
|
|
Abercrombie & Fitch (NYSE: ANF )
|
**
|
(15.0%)
|
(5.0%)
|
|
Gap (NYSE: GPS )
|
*
|
4.0%
|
5.0%
|
|
Aeropostale (NYSE: ARO )
|
**
|
3.0%
|
9.0%
|
|
Buckle (NYSE: BKE )
|
***
|
4.3%
|
10.5%
|
|
Macy's (NYSE: M )
|
*
|
(0.8%)
|
(1.3%)
|
All data from company press releases and CAPS as of Nov. 5, 2009.
Discount warehouse name Costco was a bright spot. Its success makes me wonder how Wal-Mart's (NYSE: WMT ) faring, since that discounter no longer reports its comps data every month. Gap seemed equally robust; I've been a longtime bear on the clothier, but it posted the kind of improvement shareholders have waited ages for. Only time will tell whether Gap's really back, but it's possible that shareholders' long-standing patience may soon be rewarded.
Shares of Aeropostale and Buckle (both of which have been major retail outliers through this difficult past year) are getting hit today, although both are holding up well operationally, given their positive sales data. Investors may want to consider both stocks, now that today's fall has made them a bit cheaper. (Aeropostale's down 13% on my last check.)
If you want an example of a living dead retailer, though, stay away from Abercrombie's clammy clutches. This Aber-zombie's been reporting gut-wrenching decreases in comps and net sales for quite a while now, and October's figures were no different.
From zombies to bad Santa?
The holiday shopping season is an important one for retailers, generating some 40% of U.S. sales each year. But this year's holiday season promises to be a difficult one for retail businesses and their shareholders. Beleaguered and budget-conscious consumers may soon be able to enjoy the fruits of the retail price wars looming on the horizon. But those bloody battles could make it harder for businesses to draw customers, or take a zombie-sized chomp out of their margins.
Now more than ever, it's crucial to invest in retailers with strong brands, solid balance sheets, and plenty of competitive advantage. Retailers like Abercrombie, which have been struggling to turn their businesses around in the difficult consumer spending environment, are huge risks to investors as the holiday season kicks off.
Are consumers really back? Which retailers will survive the upcoming holidaypocalypse? Will some retail names get wiped off the map? Let us know in the comment boxes below.
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