What a day for retail. If you have a lot of retail stocks on your watch list, it seems that everywhere you looked Thursday, quite a few of them appeared to be clocking in stock gains of at least 6% on a pile of upbeat same-store sales news for October. (This Foolish Take looks at the big picture behind the day's retail euphoria.) Ann Taylor (NYSE:ANN) was one of the beneficiaries, with its stock having increased in that very range.
Sure, Ann Taylor -- which one might describe as "struggling" over the course of recent history -- did report a same-store sales gain instead of the decrease that analysts had expected. (But bear in mind that same-store sales growth was a mere 1.2%.) More good news for the company was that both its original Ann Taylor and its Loft concepts had positive comps and that total sales for October increased by 11.7%.
Foolish colleague Nate Parmelee wrote a piece in August that explored some compelling arguments for Ann Taylor's improvement. Among the elements he outlined were its solid balance sheet and changes in its timing in buying inventory. And until recently, Ann Taylor had several years of excellent performance (largely hinged on the success of its then-budding Loft concept).
However, if you're going to pay up for a stock given something so short term as same-store sales -- which are informative as long as investors retain perspective -- there were other companies that showed a great deal more promise but are arguably more consistent, such as one of the greatest examples of powerhouse same-store sales, Chico's (NYSE:CHS).
There is that old saying that a rising tide floats all boats -- it seems like investors felt that way about many retailers Thursday, encouraged that consumers decided to shop again in October. Given their increase, Ann Taylor shares are now trading at 24 times forward earnings expectations. It seems to me that investors are throwing a party a little early for Ann Taylor and that a 6% increase in share price on this news sounds a bit speculative.
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Alyce Lomax does not own shares of any of the companies mentioned.
