Retail March Madness

March wasn’t exactly a lion when it comes to retail same-store sales, but it seems the data wasn’t really as ugly as a lot of people expected.

Let’s take a look at a few of the highlights.

All data from CAPS and Yahoo! Finance as of April 9; Wal-Mart and Costco comps data does not include fuel.

There are a few interesting things to note. Costco’s same-store sales dropped 5% when you add fuel into the equation, which probably lent some bearishness to investors’ reaction to the data. Target’s March sales look pretty lackluster, but they were actually a tad better than the company had originally projected.

Although March wasn’t exactly exciting for Wal-Mart, Costco, or Target, part of this is because the Easter holiday falls in April instead of March this year. Wal-Mart said it expects its first-quarter earnings to fall in the high end of its anticipated range, and so it looks as if it expects to make up for lost traction in April.

Abercrombie & Fitch continues to show dismal comps and total sales, but that is nothing new for the retailer lately. Also not surprising is that a few of the teen retail outliers from recent history continue to hold up surprisingly well despite the dismal economic climate --The Buckle, Hot Topic, and Aeropostale all reported pretty sharp March sales data.

Shop carefully
Although some retailers are holding up despite economic headwinds, I still believe investors should choose their retail stocks carefully.

For example, Hot Topic may be performing quite well, but I’ve often questioned how sustainable its success is, since it relies so much on trendiness. It also remains a very premium-priced stock in a beaten-down sector, trading at 25 times earnings, so I say, buyer beware.

The Buckle, which my Foolish colleague Kristin Graham called a retail play for 2009 in December, still looks like a more reasonably priced stock idea to me; its price-to-earnings ratio is just 16, and its business has been booming for quite some time now.

And of course, the discounters still look like solid defensive stocks, particularly Wal-Mart and Costco, since Target seems to have lost some momentum with bargain-hunting shoppers.

Overall, though, investors who are dipping their toes into retail should be searching for strong companies that can survive what remains a precarious economic climate as consumers pull back spending, find their credit lines cut, and lose jobs.

Survivor retailers are the ones with the strongest brands, good management teams, and stellar balance sheets. Steering clear of second-tier or debt-laden retailers and turnaround plays is still the path I’d recommend.  

Shop around for some related Foolishness:

• Spring hadn’t sprung for retail last month.
• February retail sales were the same old sad story.
• Luxury’s been in a freefall.