In this segment from the MarketFoolery podcast, host Chris Hill and Motley Fool Asset Management's Bill Barker assess Costco's (COST 1.91%) monthly sales figures and find them impressive. Net sales were up 13%, and comps were up 10.8%. Even in e-commerce, the company is in serious growth mode. And it's not the only retailer pleasing Wall Street: Gap (GPS 0.88%) and Michaels (MIK), for example, are bouncing higher. The Fools then consider the reasons why apparel is such a tough retail niche.
A full transcript follows the video.
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This video was recorded on Nov. 30, 2017.
Chris Hill: Sticking with retail, Costco shares up 3% today hitting a new high. This is not earnings. This is same-store-sales numbers. Is that it?
Ron Gross: Yeah, that's it. But they're incredibly impressive. I think people are kind of fatigued on Costco, because Amazon is the big story that everyone wants to talk about nowadays, and even Wal-Mart more recently coming up around the bend, coming up fast. But net sales overall up 13% for Costco for November. Comp sales up 10.8%. That's the biggest monthly comp in over six years, which is really impressive, and it looks like growth is spread across most categories. We don't have a very large press release here giving us too much detail. Looks like e-commerce was up about 39%, real strong there as well. So don't count Costco out yet.
Hill: Do you have any guesses as to why -- I mean, to have monthly same-store sales come in at a six-year high, that's --
Gross: The only thing I'll say negatively is that the calendar juiced their numbers a little bit.
Hill: OK, that's what I was wondering.
Gross: Black Friday and the holiday weekend fell in this time period, where it didn't last time. But they said that only counted for about 1.5% of the pop. So even if you exclude that, it's still really strong numbers.
Hill: You look at some of the other retailers, smaller and niche retailers -- Michaels had their third-quarter report this morning. That stock is up 11%. Gap got a downgrade from Citi, but shares of Gap up 40% in the last three months.
Gross: It's this low-expectations game that's going on here. Retail has just been so tough, and Gap has made so many bad steps over the years that expectations were just so low. And if they put up better-than-expected results or if they make good comments about the future, the stock gets bid up a bit because it was just so low that nobody wanted to touch it. I was in a Gap for the first time in years over the weekend, I just happened to stumble into one. [laughs] And I was actually pretty impressed.
Hill: Did you buy anything?
Gross: I bought some things for my son, not for myself. But I was relatively impressed, and I was like, "Oh, I remember now why I used to shop at Gap. There's some stuff here." But low expectations is the name of the game.
Hill: I think it's low expectations, but also, we've been doing this podcast for seven years, and in any given year -- and I'm just going to focus on apparel retailers for this -- one of the apparel retailers has had a good year. Now, if you buy a basket of all however many apparel retailers seven years ago when we started doing this podcast, six of those seven years, not so great. But we've seen where Abercrombie & Fitch has had a good six- to 12-month run. Obviously, Gap has had a good three-month run. Even American Eagle back in the day had a good stretch here or there. Which just makes me want to avoid apparel retail stocks altogether, because I can't imagine trying to time it like that.
Gross: Right. To give them --
Gross: Credit. I don't know what the word is. It's a really tough business to get consistently right year after year after year, because you have to be on trend; you have to know what the next thing is to stock inventory, stock the shelves with. And you can do that for certain periods of time, but to do it time and time again is even more difficult. So, what happens is, you do a nice job, you stumble, you have to put everything on sale, you have to get promotional, your gross margins get hit, your profitability gets hit, and then you either come back to fight another day and you get it right again as the cycle turns, or you are Aeropostale and you kind of don't.
Hill: [laughs] Poor Aeropostale.