All that euphoria about March retail comps proved a bit premature after all. April same-store sales data has taken the wind out of many retail stocks' sails.
Total April same-store sales rose an anemic 0.5%; according to Thompson Reuters, analysts had expected a 1.7% increase. Last April's 2.7% drop in overall comps should have yielded easier comparisons, making these numbers even crueler.
Investors should have braced themselves for something like this, though. The Easter holiday fell during March this year, boosting that month's results year-over-year, so it was never rocket science to surmise that April sales might disappoint. The slump should also prompt investors to wonder once again whether consumer spending has really made a comeback.
April sours
I've rounded up several major retailers' comps for the previous month:
|
Company |
CAPS Rating (out of 5) |
April Comps |
April Net Sales |
|---|---|---|---|
|
Costco (Nasdaq: COST) |
**** |
11% |
13% |
|
Target (NYSE: TGT) |
*** |
(5.9%) |
(3.5%) |
|
Abercrombie & Fitch (NYSE: ANF) |
* |
(7%) |
8% |
|
Aeropostale (NYSE: ARO) |
*** |
(5%) |
(0.3%) |
|
Buckle (NYSE: BKE) |
**** |
(5.7%) |
(1.1%) |
|
Macy's (NYSE: M) |
* |
1.1% |
2.8% |
|
Nordstrom (NYSE: JWN) |
** |
7.5% |
13.3% |
*All data from CAPS and company press releases.
While some investors choked on Costco's news, it's arguably not that bad. Costco missed analysts' expectations for 11.2% April comps, but only by a hair. (Stripping out gasoline price inflation and currency exchange rates, Costco's comps increased 4%, but that doesn't sound too bad, given many of its rivals' weak results.)
Similarly, Aeropostale's 5% decrease in April same-store sales isn't quite as alarming, when you realize that its same-store sales surged a whopping 20% this time last year. That's one tough comparison! Aeropostale also raised its first-quarter earnings guidance by $0.02 to $0.46 per share. Buckle got similarly cinched by the prior year's stellar results; last April, its same-store sales surged 18.2%. Both Aeropostale and Buckle were going gangbusters throughout the recession.
Nordstrom's an interesting case. Its April same-store sales figures do look very impressive, even if luxury retailers suffered serious malaise this time last year. However, I'd still regard the upscale market with a skeptical eye; many high-end retailers have begun to raise their prices, which may be too much, too soon. Consumers' recent urge to splurge on swanky items may just be a short-term treat after months of weary frugality. We shall see.
As for Abercrombie … let's just say I don't think the retailer's CEO should be tooling around on the corporate jet so much.
"Be super-picky!" she shouted
Given the continued uncertainties surrounding the health of the American consumer, incautious investors risk a nasty case of sticker shock. Hinging our retail-stock hopes on American consumers' willingness to releverage when they haven't fully deleveraged seems like a mistake to me, and the stubbornly high unemployment rate hardly sets my mind at ease.
However, given the browbeating some retail stocks are taking today, savvy retail investors could seize some deals -- provided they're extremely selective. (I'd use screaming caps lock on those last two words, if I thought my editors would let me get away with it.) The price beatdowns battering Costco, Buckle, and Aeropostale could make all three companies good potential bargains, since they've all proved their strength and reliability through previous tough times.
April's tidings remind us that things may not always be how they appear. Smart investors will choose their stocks wisely.
Are you shopping for retail stocks? Let us know your favorites and least favorites, or sound off on the state of the American consumer, in the comment box below.
