In recent weeks, we've heard pundit after pundit claim that retail sales were heading down the tank as consumers get squeezed. As you may remember, the world's biggest retailer, Wal-Mart (NYSE:WMT), was one of the companies widely predicted to feel some of the pain.
Late last week, Sam's outfit contributed a bit of cheer to the otherwise spooky fall retail season by reiterating its October sales outlook, in which it expects comp sales growth of 2% to 4%. Don't get me wrong. I'm not breaking out the keg and party streamers for what's essentially an in-line, low-single-digit comps performance. But I think, given the doom and gloom out there, that "OK" is a victory. (If you can spare a moment, stop and ponder, for just a moment, the scary, amazing efficiency of systems that allow the world's biggest seller of stuff to give us near-live updates on details, such as the fact that groceries were doing better than general merchandise.)
Since Wal-Mart is often viewed as a proxy for the retail part of the economy as a whole, it seems reasonable to ask, "To what do we owe this decent news?"
One answer could be gas prices, which have dropped back to "expensive but not excruciating." In my neighborhood, gas is about 30% cheaper than it was only a few weeks back. Another answer could be that Americans are a bit quicker to adapt than some imagine they are.
As a consumer, I didn't see a lot of evidence that my neighbors were opting to stop spending on everything. On the few times I've popped into a store lately, like this weekend's trip to Costco (NASDAQ:COST), the lines have been as aggravating as ever. Sure, SUV-hawkers like Ford (NYSE:F) and GM (NYSE:GM) have felt a pretty big gas sting, but as a retail investor, I've learned that neither extrapolations from big-ticket producers nor macroeconomic generalizations ever make me any money.
I believe that we're going to see a repeat of last year, when American spending outpaced pundit pessimism and fueled solid holiday sales. As usual, I look to top-performing retailers for the best investment opportunities, from Target and Best Buy (NYSE:BBY) on up the scale to the hip of Urban Outfitters (NASDAQ:URBN), the chic of Nordstrom (NYSE:JWN), and the swankiness of Tiffany. If you can find these companies after the stocks have been swatted down, your odds are even better.
The takeaway for investors is, as always, to read past the headlines and be ready to pounce when good businesses are tossed aside for bad reasons. If it turns out that the consumer-spending party isn't over, and the stocks move back toward their pre-hurricane levels, the recent share slides will look like a good buying opportunity indeed.
For related Foolishness:
Costco and Best Buy are Motley Fool Stock Advisor recommendations.
The Motley Fool has kicked off its ninth annual Foolanthropy campaign! Nominate your favorite charities on our Foolanthropy discussion board through Nov. 1. For guidelines on what makes a charity Foolish, visit www.foolanthropy.com .
Seth Jayson digs the retail scene, but at the time of publication, he had no positions in any company mentioned. View his stock holdings and Fool profile here. Fool rules are here.
