Retailers Get Hit Again as Sears Falls, but Costco Thrives

Stocks held steady with the jobs report on deck for tomorrow. Sears tanked on a terrible holiday sales report, but Costco impressed in its December comps.

Jan 9, 2014 at 10:13PM

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.

With investors awaiting tomorrow's all-important official jobs report, stocks held in place today as the Dow Jones Industrial Average (DJINDICES:^DJI) gave back 18 points, or 0.1%. After two straight months of 200,000-plus jobs gains, investors are anxious to see if the economy can maintain its strong job growth pace. In today's employment-related news, initial unemployment claims for the week ending January 4 fell to 330,000 from 345,000 the week before, beating expectations of 338,000. While those numbers are moving in the right direction, they're still above the level of weekly new jobless claims being posted a month ago near 300,000.

Elsewhere, retail stocks were getting roasted once again as the hit parade of retailers reporting dismal holiday sales continued. Among companies receiving a lump of coal for Christmas were Pier 1 Imports, Sears Holding (NASDAQ:SHLD), and Bed, Bath & Beyond, all of which dropped by more than double digits.

Sears took it on the chin after hours, dropping 13% in extended trading after a 3% slide during the regular session. The struggling retailer said same-store sales fell 7.4% companywide during the holiday season, dropping 9.2% at Sears domestic locations, 5.7% at Kmart stores, and 4.4% at Sears Canada locations. Management did not provide commentary on the drop, but, needless to say, these were disappointing numbers. Sears stock fell below $37, its lowest point in two years, after it had seen its share price rise earlier as many investors believe it to be an asset play due its real estate holdings and the many brands under its umbrella. Operationally, however, the company has turned into a disaster, and reports like this are no surprise at this point. Analysts had expected a per-share loss of $0.16 in the usually strong holiday quarter, though that number will probably fall after today's report.

Still, it wasn't all bad news for the retail sector. Costco Wholesale (NASDAQ:COST) finished up 3.9% after reporting better-than-expected December sales. Though the warehouse retailer is not known for the holiday-season gift-giving bump that many retailers get, the numbers were still impressive considering the lackluster season most in the industry had. Costco said that overall sales increased 6% last month, and same-store sales improved by a healthy 5% clip domestically, and 3% globally. While Costco is among the strongest companies in retail thanks to a unique membership model and a low-cost proposition that even Wal-Mart struggles to match, the stock now trades at a P/E of 25, perhaps too pricy for the modestly growing behemoth.

Two retailers you can count on
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Fool contributor Jeremy Bowman has no position in any stocks mentioned. The Motley Fool recommends Costco Wholesale. The Motley Fool owns shares of Costco Wholesale. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

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Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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