Yesterday afternoon, I spent a bit of time tagging along as some local high school teachers judged the homecoming-week hallway decorations at their school. In the hallway designated for an Old West theme, I noticed that the eighth-graders had painted signs, in puffy glitter paint on colored construction paper.
A few of them read: "Save a horse. Ride a cowboy."
By the time I was done clutching my splitting sides and wiping the tears from my eyes, the teachers and superintendent had already deposited the offending signage in the nearest trash receptacle. Consensus was that the eighth-graders -- bless their little hearts -- were probably unaware of just how naughty that sign was. They'd probably just misinterpreted something, a T-shirt or bumper sticker, that they'd seen in one of those joke stores at the mall.
Coincidentally, yesterday was also "comps" day, and the same-store sales figures that rolled onto the news wires reminded me that eighth-graders aren't the only ones out there who misinterpret what they see at the mall.
If you follow the numbers, you know how well my observations correlated to the reality of same-store sales results: They didn't.
Guess? put up strong 11.3% same-store sales growth and noted that a greater portion of sales were made at full prices than in the prior year. Gap, on the other hand, turned in the usual same-store sales decline, -3% this time around. (Banana did tick upward 3%, however.) New York & Co. didn't stink it up as badly as it has in recent past, but the 2.3% comps growth was nothing to make this shareholder excited.
Which brings us to the lesson of the day: Don't overdo it on the whole Peter Lynch-ish "buy what you know" thing. The fact is, when you rely on your impressions from a mall visit, you know a lot less than you think you do.
Abercrombie & Fitch
So don't misinterpret the mall. Investing successfully -- especially in retail -- means paying attention to the real numbers delivered every quarter. Trends in inventory, cash conversion, and margins will tell you a lot more about the health of your investments than your read on the trends in scarves or skinny pants.
At the time of publication, Seth Jayson had shares of Guess? and New York & Co., but no position in any other company mentioned. View his stock holdings and Fool profile here. See what he's Digging these days. Gap is a recommendation of both Motley Fool Stock Advisor and Motley Fool Inside Value. Fool rules are here.