Retailers Tank Despite Markets Moving 1% Higher

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

This morning the Bureau of Labor Statistics released November's jobs data. While analysts expected the number of new jobs for the month to come in at 180,000, the actual result was 203,000. Furthermore, the unemployment rate was predicted to be 7.2% but instead fell to 7%, even though the labor force participation rate increased from 62.8% in October to 63% in November.

That wasn't the only good news released this morning. The University of Michigan reported a preliminary consumer confidence reading for December of 82.5, compared to 75.1 in November and the 75.5 economists had predicted.  

These reports indicate that the U.S. economy is growing stronger, if at a very slow pace. Today's jobs figures also mean that the Federal Reserve could begin tapering stimulus efforts before some expect. That could be a double-edged sword, suggesting that the economy no longer needs help, but also removing easy money and potentially making it tougher for businesses to grow and prosper.

For the moment, investors are just looking at the good side and pushing stocks higher. As of 1:15 p.m. EST, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is up 172 points, or 1.1%, while the S&P 500 has climbed 1.03% and the Nasdaq is higher by 0.78%. Unfortunately, though, while the major indexes are moving higher, we can still find a few losers within the mass universe of stocks; let's take a look at why three companies are moving lower.

Shares of Family Dollar (NYSE: FDO  ) are down 2.74% after Sterne Agee downgraded the stock from neutral to underperform. Analyst Charles Grom stated that the bull case for owning the company was a takeover by Dollar General, but he argued that is not likely in the near future. He also lowered his price target on the stock from $62 per share to $56. Additionally, the company's last earnings report offered a cautious 2014 forecast below what analysts were looking for, meaning that growth and share price appreciation may be getting hard to come by for Family Dollar.  

Within the teen retail space a few big players are making big moves lower today. Shares of American Eagle Outfitters (NYSE: AEO  ) are down 8%, while The Gap (NYSE: GPS  ) is down 2.49%. American Eagle Outfitters reported earnings this morning and results were not good. The company posted net income of $0.13 per share, compared to $0.39 per share last year. Not only were this quarter's results weak, but the company predicted future results to falter as well. Management stated that fourth-quarter 2013 earnings per share will fall in a range of $0.26-$0.30 due to a double-digit decline in comparable-store sales.  

The Gap reported a 2% increase in same-store sales for November, but some analysts warn that the company's results may not be that great. Discounting across the board will likely hurt margins, and despite strong sales figures earnings per share will come in weak. Jefferies analyst Randal Konik lowered the company's rating from buy to hold today based on this theory.  

More Foolish insight

To learn about two retailers with especially good prospects, take a look at The Motley Fool's special free report: "The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail." In it, you'll see how these two cash kings are able to consistently outperform and how they're planning to ride the waves of retail's changing tide. You can access it by clicking here.


 
 
 
 

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