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Retailers Rally on September Growth

U.S. retail sales for September marked the strongest growth in seven months according to government data released on Friday. An increase in purchases of apparel, automobiles and furniture helped

Shares of luxury retailers like Saks (SKS) and Macy’s Inc. (M), which also owns Bloomingdale’s, led the group higher. Sales at both companies, reported earlier this month, exceeded analyst’s growth expectations with respective same-store sales growth of 9.3 percent and 4.9 percent for September. Nordstrom (JWN), another high end shopping destination, also contributed to the day’s strength.  Nordstrom’s  same-store sales grew by 10.7 percent last month according to the report released Oct. 6.  Shares have been edging higher since, adding over 5 percent, and are now only slightly off their 52-week peak.

Discount Retailers like Target (T) and Wal-mart (WMT) ended the session up, but mostly flat.

Modest but positive performance in September could also be observed among U.S. automakers. Auto sales were the primary driver behind September’s retail sales rise, climbing 3.6 percent last month, marking the largest margin of increase in a year and a half.

General Motors (GM) was among the few companies within automotives to see a significant rally, adding around 4 percent for the session. The past month has been positive for GM, with shares tacking on over eight percent but the persistent negativity surrounding the U.S. economy has depleted shares by nearly 35 percent for the year.

Another American car company to benefit from the news was Ford (F). Investor enthusiasm for Ford was more measured than it was for GM, as the optimistic retail data was accompanied by reports that the company’s latest contract with the United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) is at risk of being rejected.   Three factories have already refused the contract and a tally of union workers indicated that the number of participants that are against the contract outweigh those in favor of it. If fewer than half of workers support the deal, a restructuring will be mandatory. The possibility of a strike at that time has been discussed. The impact that this would have on sales and production is hampering investor support of Ford for the day.

While the 1.1 million cars sold last month in the U.S. was responsible for the bulk of the growth, home furnishing stores also contributed with a 1.1 percent increase. Investors took note and began snapping up shares of Pier 1 Imports Inc. (PIR). Pier 1 closed the session up around 4.5 percent. Pier 1 is up 44.5 percent against this date last year.

Bed Bath & Beyond (BBBY) gained more moderately but succeeded in reaching a new 52-week high during the session. Like Pier 1, BBBY has tacked on over 40 percent during the past 52-weeks, likely a response to success within its own stores and macro influences.

Overall, retail sales are 7.9 percent higher than the year ago period. Over the past three months, sales have grown by 8 percent. Some fear a weak holiday season could destroy the recent gains but some investors appear to be banking on the notion that retail will once again outperform the expectations of analysts.


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