Retailers Shine in September

Brittney Barrett |

MallIn spite of weakened consumer sentiment and ongoing discussion of a potential double dip, retailers have been performing ahead of expectation. Last month’s retail sales exhibited unforeseen strength, with more than half of the 23 reporting retailers surpassing the expectations of analysts.

Improvements had been anticipated on August numbers, which were dampened by Hurricane Irene, but growth beat even Wall Street projections of 4.6 percent. The bundle of companies ended up adding 5.1 percent for the month. What could be obtained from an analysis of those businesses that thrived and the others that fell, is that the middle range of retailers are among the greatest victims of the current economic situation.

While discount retailers look appealing to those pinching pennies and high end stores can reap the benefits of the old “rich-get-richer” idiom in a recession, the mid-range often gets ignored. This speaks volumes on consumer sentiments and some analysts asserted that it did not mean consumer spending was improving. With stagnant growth in wages and continued unemployment in the spotlight, the September numbers are not expected to repeat themselves next month or into the holiday season.

Despite these predictions, investors reacted enthusiastically to the reports and snapped up shares in the sector, especially of lower-priced options like the 99 Cent Only Stores (NDN), which was among the biggest gainers of the sector. TJ Maxx (TJX), was also trading higher after outpacing gains of mid-range competitors and exhibiting strength beyond what was expected of it. Same store sales at TJMaxx, which also owns HomeGoods and Marshalls, added 4 percent for the month. Total company sales for that period were $2.2 billion, a 6 percent increase from the comparable period in 2010.

Washington based, Costco (COST) had the most impressive monthly performance of all the companies, with 17 percent gains in net sales and 12 percent growth in same-store sales. Earnings for the company reached $478 million or $1.08 a share, from $432 million or 97 cents in the year-earlier period. The company’s success sent shares soaring until an announcement that the wholesaler would hike membership fees by 10 percent caused a reversal that led COST into the red for the day.

Shares of Target Corp. (TGT) pushed higher again after the popular discount retailer boasted a rise of 5.3 percent in sales against estimates of 3.9 percent. Throughout the year, Target, has been dogged by unfavorable analyst estimated who seemed to believe the company's heyday had come to a close. Target’s gains were led by more buying in household and beauty products. The latter ties into the Lipstick Index, or the theory that women tend to purchase small and affordable luxury items when money gets tight.

Granted some women, and men for that matter are not suffering from thinner wallets, as evidenced by the performance of New York-based, Saks Inc. (SKS) The luxury retailer was trading sharply higher after reporting same-store sales growth of 9.3 percent for September. The company said total sales added 7.3 percent to 275 million from the same month a year-ago. The growth blew past Wall St. estimates of 6.5 percent for the month.

Toward the middle of the spectrum, companies were seeing reversals equivalent the gains discount retailers. Gap Inc. (GPS) announced a decline in same-store sales of 4 percent against a 3.8 percent analyst prediction. Net sales; however pushed slightly higher to $1.35 billion from $1.34 billion. This helped shares of Gap edge higher for the day regardless of the losses.

Other reporting companies for the day including Nordstrom (JWN) and The Limited Brands (LTD) also performed ahead of Wall St. expectations, although shares of the former closed the day lower.

 

 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
ADMA ADMA Biologics Inc 7.24 -0.08 -1.09 45,610
COST Costco Wholesale Corporation 152.51 5.02 3.40 7,318,123
GPS Gap Inc. (The) 22.24 0.54 2.49 4,257,868
JWN Nordstrom Inc. 51.88 0.40 0.78 2,607,114
TGT Target Corporation 68.68 0.96 1.42 4,900,507
TJX TJX Companies Inc. (The) 74.78 0.91 1.23 3,117,938

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