Retailers are Resilient Despite Global Economic Woes

Retail was among the few bright spots on Friday as a number of retailers posted optimistic earnings. The news that consumers are still spending in spite of overarching concerns regarding the global economy has led the S&P Retail Index (RLX) to outpace both the Dow Jones Industrial Average (DJIA) and the S&P 500 Index (SPX).

Among the companies seeing the greatest improvements in this economy are the department stores offering a range of product categories, particularly those that maintain affordable pricing. Macy’s (M) and Target (TGT) have both been benefitting from the weaker economy.

Higher fuel prices, which typically negatively impact consumer spending, are actually a boon for companies like this, as shoppers on a budget aim to save gas with a one-stop shop. The competitive prices compound consumer interest. Wal-Mart (WMT) stands as an example of this trend, with second-quarter net income up 5.7 percent. The world’s largest retailer has earnings per share of $1.09 against 97 cents in the year ago quarter. For the upcoming fiscal third quarter, Wal-Mart expects continuing operations to generate profits of between 95 cents and $1 a share against last year’s flat 95 cent earnings.

Other major retailers without the multiple benefit of multiples categories have been working to identify where the majority of demand is coming from as the global economy shifts. At Gap (GPS), women’s clothing tended to lag while men’s baby and kids clothing continued to experience second quarter gains. Suspicion is that in times of turmoil, women will stop shopping for themselves before their child or spouse.

Shares of the company were up in the last day of trading for the week following Thursday’s conference call, during which the company confirmed its annual outlook. The consistency is especially impressive in an environment where many other major brands are adjusting outlooks to coincide with recent economic changes.

One major brand that appears to be regaining some lost vigor in the weak economy is Abercrombie & Fitch (ANF), which saw profit improve by 64 percent. The company’s CEO, Mike Jefferies confirmed they would encounter increased costing pressure during the end of the year but strong top-line momentum and overall performance should continue to drive profits. Among the element helping to boost Abercrombie are the increase in International sales, which were up 74 percent from the year-earlier. The mention of challenges in the final stretch of the fiscal year seemed to eclipse the good news from the company, pushing share prices down for the second consecutive day.

Same-store sales gains at Foot Locker (FL), also led the company higher after Thursday’s report that second-quarter profit for the company reached $37 million, or 24 cents a share, from $6 million or 4 cents a share in the year earlier period. Sales rose 16 percent to $1.28 billion, far surpassing analyst expectations and helping to inflate shares.

While retail was among the few sectors with positive news today, earnings weren’t all good. Sears (SHLD) bucked the department store trend with sales lower by 1.2 percent.  The corporation, which also owns K-Mart, pointed to $48 million in closing and conversion costs as the culprit for losses. The company’s CEO expressed intentions to take action and reverse the downward trajectory, but investors weren’t convinced and began shedding shares early in the day.

Anne Inc. (ANN) also disproved theories regarding women’s clothing and economic times as shares rocketed following the news of a comparable store sales increase of 8.6 percent. Ann Taylor experienced 5.3 percent growth while the Loft shot up 11 percent. Third-quarter and full year predictions also surpassed Wall Street expectations. The company anticipates a continuation of the trend, with higher gross margins for the second half of the year in spite of economic conditions.  Anne Inc. associates the success with changing its offerings to include new, different items and more contemporary tailoring.