WaveStrength Market Trends for November 30, 2006
Retail Continues to Disappoint
by Ann Sosnowski
My original thesis still stands… retail investment will dry up until fourth-quarter earnings are released in early 2007.
Of course, anytime retail is having a tough time of it all… it gets blamed on the weather.
According to an article on CNNMoney “warmer-than-usual weather tempered November sales gains especially at some specialty apparel and department store chains.”
Is this because consumers aren’t in the holiday buying mood when they’re not wearing their scarves and bulky coats? No way: it’s just an excuse to blame away the poor performance of retail companies going into the holidays.
As I stated this morning, the numbers aren’t looking so good…
Costco Wholesale Corp. (COST:NASDAQ) posted same-store sales of 5%, below analysts’ expectations of 5.7%.
On top of that, Pier One Imports Inc.’s (PIR:NYSE) same-store income fell a shocking 15.3% due to poor home furnishing sales… Nordstrom Inc. (JWN:NYSE) hit a 5.4% sales increase instead of 5.7%… and Ann Taylor Stores Corp. (ANN:NYSE) fell 4.3%, almost three times the expected loss of only 1.7%!
Abercrombie & Fitch Co. (ANF:NYSE), one of the most popular specialty retail stores for those in their teens and twenties, showed a 3% decline in November same-store sales.
Gap Inc. (GPS:NYSE) had a drop in same-store sales of 7% year-to-date, compared with a drop of 5% last year.
What’s happening here? Well, let me show you how cyclical this is…
Look at GPS stock during the same time last year: it ran flat and dropped.
Look at COST this year, versus last year: It runs flat and drops into the first month of the following year.
Look at Wal-Mart Stores Inc. (WMT:NYSE), one of the most flat-trading stocks in the retail sector… it spikes in October and November and then falls into the next year.
Even Target Corp. (TGT:NYSE) runs flat and rolls over near the end of the fiscal year.
Again, this is not the time to own retail stocks. The Retail Service HOLDRs (RTH:AMEX) is at a crucial juncture right now above the 200-day Moving Average.
This is almost always broken going into December, as the RTH sets a low on its falling leg.
Considering this is the major gauge of the retail industry as a whole, it’s looking vulnerable.
Wait until next year to buy retail stocks.