This week, retail comps data for the month of July -- a month known for its thunderstorms yielding sunny skies -- revealed an interesting mix of disappointment, continued struggle, and continued amazing performance. For example, while Wal-Mart may have spooked investors despite months of incredible success, McDonald's
Wal-Mart shook up the markets yesterday when it said same-store sales in July rose 3%, missing analysts' expectations for a 3.4% increase. This apparently jogged some people's memories regarding the whole idea that once the economic stimulus checks are gone, they're gone. Wal-Mart warned of some approaching slowness, and also observed that many customers are shopping on a paycheck-to-paycheck basis.
I also noticed two rather chronic strugglers, Gap
Poor, poor Chico's continues to wow with its ability to provide nauseating plunges in monthly same-store sales. In July, Chico's comps plummeted 18.5%. Of course, Gap and Chico's are two good examples of retailers that were struggling to turn around even before our current economic slowdown. Needless to say, getting the merchandise right and luring customers back into the stores will be a whole lot harder now.
Oh, and let's not forget Abercrombie & Fitch
The silver linings
Of course, last week when I told investors to calm down and shop, I was going with the idea that there are retailers out there that are still doing well, despite the economic difficulties we've been facing.
Today, McDonald's is giving us a good example. Its July comps jumped a whopping 8%, and it was even able to serve up a 6.7% increase in U.S. comps, despite overall economic weakness. Even if McDonald's is tinkering with its Dollar Menu, I have a feeling consumers will continue to see great value in its offerings.
Last but not least, check out The Buckle
Look beyond the stormy skies
I've said it before: One month of same-store sales data is no reason to buy or sell a stock, but such data does yield some great insights about retail brands and success, particularly over time. And I'm finding the fact that some retailers are flagrantly bucking the current harrowing consumer spending trends absolutely fascinating.
For those of us who are snooping around the retail sector for some interesting stock ideas, figuring out the differentiators that insulate the winners from the economic headwinds -- and tempt consumers to part with a little bit of their money, which is no easy task -- is one way to find some great stock ideas for the long term. After all, figuring out the elements that help some retailers excel despite bad times -- factors that may go far beyond simple cheap pricing -- should yield some great long-term stock ideas.
Gap is a former recommendation of Inside Value, where Wal-Mart is still an active selection. Give the service a try free for 30 days.