Home > Stock Analysis

Retailers Tell Two Different Stories

Posted: Apr 13, 2009 15:35 PM by Eric Fox

Tickers in this Article: ROST, JCP, CHIC, ZUMZ, ANF

Recent monthly sales reports from different retailers give conflicting views of a recovery, raising the question of whether this information promotes short-term speculation around the group and increased volatility. The investment world needs less of this.

Get Free Stock Analysis By Email

IN PICTURES: Eight Ways To Survive A Market Downturn

All public companies report earnings quarterly, with an occasional update in between at conferences or meetings of institutional investors. The retail sector is one of the few that reports sales monthly to investors. Perhaps the industry should stop releasing this data monthly with the goal of training investors to have a long-term investment horizon - something that would benefit the market as a whole. (Read between the lines to get a sense of where a company is really headed; see Get The Most Out Of An Investor Conference.)

The Bad
Specialty retailer Abercrombie & Fitch (NYSE:ANF) reported that its comparable same-store sales (comps) for March decreased 34%. This is certainly not indicative of a recovery. However, Abercrombie may be a special case as one of the few retailers not offering extensive promotions to boost sales during the recession.

Zumiez (Nasdaq:ZUMZ) reported its comps decreased 17.9% for the period that ended in March. Zumiez sells apparel and sportswear to young people who are into extreme sporting, including skateboarding, surfing, snowboarding, motocross and BMX. I would have thought this niche market would not be so impacted by the recession.

The Good
Charlotte Russe Holding (Nasdaq:CHIC) raised its guidance for the second quarter of 2009 to a range of 2 cents to 5 cents per share, from the previous guidance of a loss of 10 cents to 20 cents. This was in spite of an 8% decline in comps for March. Overall, the company seems to be in decent shape with no debt and a cash balance of around $50 million, or 25% of its market capitalization.

In the world of department stores, J.C. Penney (NYSE:JCP) reported a 7.2% comps decrease for the period ending April 4. While normally a decline of this size would not be good news, since the decline was less than expected, the stock rose. The company also raised forward guidance for the upcoming quarter. (Learn how to interpret these numbers in The Flow Of Company Information.)

Ross Stores (Nasdaq:ROST) reported a 3% increase in comps in the period that ended April 5. The company is now forecasting 3-5% comps growth in April and boosted guidance for the full quarter. Ross has a reputation as a discounter. The company has powered its way through the recession and now is only 3% below its all-time high.

Unnecessary Monthly Volatility
The retail group reported a mixed bag of results for the month of March, with the end result being more unneeded volatility in the sector. Management must surely realize that such attention to short-term trends brings out the basest of instincts in investors and is not good for any of us.

By Eric Fox

Eric J. Fox, is the founder of Brittain Capital Management, LLC., which manages the Alesia Fund, LP., a Value oriented long/short investment partnership. You can read more of his views on investments at his blog - Stock Market Prognosticator.

Rate this Article: Your Rating: Overall Rating: Vote Now!

MORE STOCK ANALYSIS