People seem to be in the mood for shopping. The March results for same-store sales came in late last week, and they're downright positive for a lot of the biggies, besting predictions in many cases.
But Sam Walton's brainchild isn't the only bright spot. Target's
For every yin, there must be a yang. Sears
Retail sales are relatively righteous right now -- alliteration aside, what does it mean?
To begin with, it should be said that there is nothing more gratifying to an investor's intellect than the happy-go-lucky, carefree attitude of the confident consumer; it means that people feel a general sense of serenity and are willing to inject a portion of their disposable income into the system (to hopefully be captured by one of the companies in an investor's portfolio). A wonderful thing.
But do these numbers reflect solid consumer confidence? Not necessarily. According to the results of a recent survey, the measure seems to be in decline.
An investor at this point should heed caution before entering the retail sector. With the mercurial state of the world right now, there is the strong possibility that the consumer could become severely spooked by any more bad news from Iraq (or from any other part of the world, for that matter). Also, with the presidential elections coming up, the mindset of buyers could change as different political agendas are pushed.
And let's not forget the price of oil -- sure, it may be black gold to a Beverly Hillbilly, but it's been burning holes through legions of pockets at the pumps. Oh, and one other thing -- Alan Greenspan hasn't necessarily forgotten about those rates, folks. A plethora of varied opinions exist on whether he is going to tighten later or sooner. No one really knows, but it is entirely within the scope of plausibility that he does so before '04 becomes '05.
Retail companies can be a great long-term investment, but a proper entry point should be sought. Many retail investors have already enjoyed recent significant capital appreciation for retail stocks, so patience might be a virtue in this case, given all the potential threats to consumer confidence on the horizon.
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Fool contributor Steven Mallas owns none of the above-mentioned stocks.