A book about America's addiction to prescription drugs got me thinking about this country's other addiction: Shopping. The current recession has finally scared Americans into saving, something they haven't done since the early 1990s. As recent as April 2008, the savings rate was zero. It now sits around 6.9%, about half the all-time high of 14.6% in May 1975. Clearly, Americans are getting the picture and retailers are paying the price - for the time being anyway.
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It seems unlikely that the savings rate will get to double digits. October 1982 was the last time it did so. Soon enough Americans will get back to their normal patterns for spending and as such, let's look at some of the retail stocks I've covered in the last year to see how they've held up and where they might be headed in the future.
Retail Stocks One Year Later
|
Company
|
Price - July 21/08
|
Price - July 21/09
|
Return
|
|
Buckle (NYSE:BKE)
|
$29.75
|
$31.24
|
5.0%
|
|
Tractor Supply (Nasdaq:TSCO)
|
$30.61
|
$47.11
|
53.9%
|
|
Petsmart (Nasdaq:PETM)
|
$20.07
|
$22.68
|
13.0%
|
|
Amazon.com (Nasdaq:AMZN)
|
$68.48
|
$89.01
|
30.0%
|
|
Williams-Sonoma (NYSE:WSM)
|
$18.06
|
$13.06
|
-27.7%
|
|
Arden Group (Nasdaq:ARDNA)
|
$132.52
|
$132.98
|
0.3%
|
|
American Apparel (AMEX:APP)
|
$6.88
|
$3.58
|
-48.0%
|
|
Jamba Inc (Nasdaq:JMBA)
|
$1.19
|
$1.05
|
-11.8%
|
|
|
|
|
|
|
S&P 500
|
1260.00
|
954.58
|
-24.2%
|
|
Merrill Lynch Retail HOLDRS (NYSE:RTH)
|
$85.71
|
$80.28
|
-6.3%
|
| Note: All prices are adjusted for dividends and splits |
Two Favorites
In the past year, my two favorite stocks: Tractor Supply and Buckle have both outperformed the S&P 500 and Merrill Lynch Retail HOLDRS ETF by a wide margin. Obviously, Tractor Supply has been the superior performer of the two. At this point, I wouldn't be surprised if the rural retailer hit my predicted stock price of $60 by the end of the year. In my opinion, it's one of the most unique retailers going.
As for Buckle, the stock has been up and down despite hitting same store sales homeruns every month. I guess investors feel it's had too much success in this terrible economy. They'd much rather put their money on the incredible shrinking machine that is the Gap (NYSE:GPS). However, those who picked up Buckle last November around $13.50 are laughing all the way to the bank.
Big Disappointment
Williams-Sonoma has been a big disappointment but not for the reasons you might think. Their internet success along with Amazon helped further the belief that the online shopping site was a great long-term investment despite trading at full value, and was easily the best ecommerce business anywhere on the planet. It was a slam-dunk pick at the time and if you currently own it, continue to do so.
Williams-Sonoma on the other hand was my great contrarian pick. Its internet business was growing and seemed like it would continue to do so. It turns out I was wrong. Internet sales were off by 6% in 2008 and 2009 appears to be heading for a similar or worse decline. This is the growth vehicle for the company. As it goes, so goes Williams-Sonoma. For this reason, buying the stock is risky until the situation improves.
The Bottom Line
While I missed the big 30% surge in the Merrill Lynch Retail HOLDRS ETF by one month, I still think you should be in the retail market. Looking at the long-term chart for the ETF, it looks like we are at the beginning of an extended move to the upside and we've just finished the first leg. (To learn more, see Analyzing Retail Stocks.)
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