I doubt it’s a surprise to anybody who has any clue about current events in our economy that January same-store sales data would be dramatically bad for many retailers. Let’s take a look -- there are some big losers, but some big winners, too.


CAPS Rating (out of 5)


Net Sales

Impact on Price (intraday)

Wal-Mart (NYSE:WMT)





American Eagle Outfitters (NYSE:AEO)





Aeropostale (NYSE:ARO)





The Buckle (NYSE:BKE)















*All data from CAPS and Yahoo! Finance as of 2/5/09; Wal-Mart comps data does not include fuel.

I’d say there’s some serious drama here. In other words, the comps data from retailers like Gap, Saks, and American Eagle are dramatically bad. Gap continues to be plagued not only by weakness at its namesake stores and Banana Republic, but its Old Navy chain posted a crazy 34% plunge in January same-store sales. Ouch.

Meanwhile, despite its solid rating within our CAPS community, American Eagle reported a major drop in comps (and has been struggling for quite some time). Saks also joins the list of the wretched; it has been among the department store retailers having major problems amid the downturn, and it recently made my list of possible retail death-watch stocks because of its high debt and the adverse effects of the rapidly worsening economic situation. It’s hard to be a high-end retailer in this kind of environment.

Some retail stocks’ prices are jumping today, despite abysmal comps data, but that appears to be the result of having “done better than analysts expected” for the month. That’s the kind of short-term noise and silliness investors would do well to avoid.

The search for outliers
I’ve often said not to give up on the retail segment altogether, though, and the outliers are indeed interesting to watch. The Buckle and Aeropostale have long been bucking the nasty trends in retail, and both continued racking up the revenue in January. Interestingly enough, neither one has a particularly good CAPS rating, which makes me wonder if they’re both simply flying off the community’s radar.

And of course, there’s Wal-Mart. I’ve often had problems with the way that retailer does business over the years, but it has worked on many of its old issues and still looks like a good defensive stock in this economy, since its mission has always been to offer low prices to shoppers. And frugality is clearly in.

Last but not least, even though Costco (NASDAQ:COST) had some less-than-exhilarating news yesterday, it’s still a strong player in the discount niche and an awfully well-run company.

Careful shopping, Foolish investors
As I’ve said many times before, investors shouldn’t give up on retail altogether; rather, they should look for well-run companies with high-quality brands. And certain outliers -- the ones that have been consistently doing well despite the poor economy -- are even more interesting stock ideas.

And of course, I also think investors should keep their portfolios more secure by searching for stocks that have plenty of cash and little or no debt. For example, I still wouldn’t call Gap a bargain, or venture to say that it’s going to be able to turn itself around and offer growth to investors, but its stash of cash gives it a survivalist edge in the terrible retail environment.  

The American consumer is shopping carefully, and this will hurt or maybe even kill many retailers. However, the retailers that survive will be more well-positioned than ever. Investors should shop just as carefully for retail stocks. The opportunities are out there, and the healthiest and nimblest retailers will survive.

Shop around for related Foolishness:

Wal-Mart Stores and Costco Wholesale are Motley Fool Inside Value recommendations. Costco Wholesale is a Motley Fool Stock Advisor pick. The Fool owns shares of American Eagle Outfitters. Try any of our Foolish newsletters today, free for 30 days.

Alyce Lomax does not own shares of any of the companies mentioned. The Fool has a disclosure policy.