Retail Sales Out of Fashion

By The Greek - Economy & Markets:

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Retail Chain Store Sales

Retailers reported individual chain store sales for the month of February Thursday. The International Council of Shopping Centers reported that sales fell 0.1%, better than the 1.6% decline in January. The news varied of course, but carried a shared theme of market size contraction. We've been speaking of this for so long now that we have shied away from repeating it recently. Unfortunately that leaves new readers of The Greek unaware of our past predictions and our proficiency (while conceding imperfection).

The retail marketplace is now exposed as a saturated one, and in this contracting environment, the weakest players are dropping by the way side. This in turn will drive commercial rents lower, and flood the commercial marketplace with even more vacancies. Much of this has already unfolded, but more layoffs, store closings and bankruptcies are in store. If you would like to contract me to figure out what to buy and what to sell in the sector (or any sector), I'm available for such work, and my equity research performance speaks for the value itself.

Today's results showed the discounters continue to survive and lead this market as they steal share from department store, specialty and empty-mall-based operators. In tough times, price matters more, and so shoppers migrate naturally to the discount shops. One such discount shop has become such an important part of the American economy, that if we remove it from the ICSC data, same-store actually fell 4.3% in February. Wal-Mart (NYSE: WMT) reported its February sales today, and they shined, rising 5.1%. The chain is doing so well, stock rising 20+% in 2008, and growing sales all the while, that the company hiked its dividend Thursday.

Wal-Mart's little brother, Target (NYSE: TGT), seems to be evolving into its rival. The company started expanding its grocery section months back, and is talking about committing a little bit more to that effort now. Target sales fell 4.1% in February.

Another group that did well was the pharmacies, but keep in mind that "well" is a relative term these days. The reason behind the group's resiliency can be found in what they offer for sale. These stores sell what people need every day, consumer staples. You gotta have your toothpaste, your contact lens solution, your toilet paper (what did he say!), YOUR HEMORRHOID CREME!!! cause you are human! You are alive... and you have foot fungus!

You have to have those things, and you buy them with the left over change in the cookie jar. And so, Rite Aid (NYSE: RAD), Walgreen (NYSE: WAG) and CVS Caremark (NYSE: CVS) have an advantage over many other shopkeepers during tough times. Still, sales fell 0.9% for Rite Aid and 1.9% at Walgreen, mostly due to other things these stores sell outside of staple goods. The funny thing is that these companies started selling "other" things to leverage the draw aspect of the stores. Pharmacies draw customers into their stores for needed items, and while they have them there, they attempt to boost the total ticket with spontaneous purchase goods like candies, chips, and at some stores, almost anything under the sun. Now, these "other" items are weighing on performance, because who is going to buy a radio from Rite Aid during a deep recession... That's NOT a question!

Luxury Loses

The rich don't always get richer. As a matter of fact, when a Democrat is elected into the presidency, and the Congress is controlled by Democrats as well, that's not a cause for party on the Upper East Side! Then, on top of everything else, stock market decline exposes every Ponzi scheme from 70th and Park down to 60th and Lex. That's a LOT of Ponzi because it includes Bernie. So, nobody should be surprised to see Saks' (NYSE: SKS) February sales fell 26% and Nordstrom's (NYSE: JWN) dropped 15%.

You haven't read this anywhere else (maybe)... This is the reason why. When volume drops at even the slightest rate at a store like Tiffany's (NYSE: TIF), where each item has an attached price tag that matters, sales dive significantly. It's because the price tags are so rich that these stores are taking such big hits now, not because the rich have lost all their money. That's a myth, at least until the Swiss accounts are unveiled!

EPS Report Schedule

ExxonMobil (NYSE: XOM) had its analysts' meeting, while the EPS list included 21st Century Holding (Nasdaq: TCHC), 3D Systems (Nasdaq: TDSC), Airspan Networks (Nasdaq: AIRN), Alaska Communications (Nasdaq: ALSK), Alliance Healthcare (Nasdaq: AIQ), Alon USA Energy (NYSE: ALJ), AmBev (NYSE: ABV), Analogic (Nasdaq: ALOG), Angiotech (Nasdaq: ANPI), Anika Therapeutics (Nasdaq: ANIK), ArcSight (Nasdaq: ARST), ArQule (Nasdaq: ARQL), Artesian Resources (Nasdaq: ARTNA), B&G Foods (NYSE: BGF), Babcock & Brown (NYSE: FLY), Bio-Reference Labs (Nasdaq: BRLI), Cedar Shopping Centers (NYSE: CDR), China Security (NYSE: CSR), Ciena (Nasdaq: CIEN), Clean Energy Fuels (Nasdaq: CLNE), Clearwire (Nasdaq: CLWR), Cornell (NYSE: CRN), Crown Media (Nasdaq: CRWN), Depomed (Nasdaq: DEPO), DexCom (Nasdaq: DXCM), Dialysis Corp. (Nasdaq: DCAI), Dynamic Materials (Nasdaq: BOOM), Emergent Biosolutions (NYSE: EBS), Finisar (Nasdaq: FNSR), Fuel Systems Solutions (Nasdaq: FSYS), Fuel Tech (Nasdaq: FTEK), Genesco (NYSE: GCO), Gerber Scientific (NYSE: GRB), GTSI Corp. (Nasdaq: GTSI), Gulf Island Fabrication (Nasdaq: GIFI), Gushan Environmental (NYSE: GU), Harvest Natural Resources (NYSE: HNR), Home Inns and Hotels (Nasdaq: HMIN), I.D. Systems (Nasdaq: IDSY), Icahn Enterprises (NYSE: IEP), Insulet Corp. (Nasdaq: PODD), Intrepid Potash (NYSE: IPI), K-Swiss (Nasdaq: KSWS), Kopin (Nasdaq: KOPN), Lakes Entertainment (Nasdaq: LACO), Lincoln Educational (Nasdaq: LINC), Marvell Technology (Nasdaq: MRVL), Mastech (NYSE: MHH), McCormick & Schmick's (Nasdaq: MSSR), National Cinemedia (Nasdaq: NCMI), Navisite (Nasdaq: NAVI), Noven Pharma (Nasdaq: NOVN), Orion Marine (Nasdaq: OMGI), Pinnacle Airlines (Nasdaq: PNCL), RAE Systems (NYSE: RAE), RHI Entertainment (Nasdaq: RHIE), Safeguard Scientific (NYSE: SFE), Smith Micro (Nasdaq: SMSI), Steinway Musical (NYSE: LVB), The Cooper Cos. (NYSE: COO), Trans World Entertainment (Nasdaq: TWMC), U.S. Physical Therapy (Nasdaq: USPH), Union Drilling (Nasdaq: UDRL), Urban Outfitters (Nasdaq: URBN), West Marine (Nasdaq: WMAR), Wind River Systems (Nasdaq: WIND), Youbet.com (Nasdaq: UBET) and more.


(Article interests: AMEX: DIA, AMEX: SPY, Nasdaq: QQQQ, NYSE: NYX, AMEX: DOG, AMEX: SDS, AMEX: QLD, AMEX: XLF, AMEX: IWM, AMEX: TWM, AMEX: IWD, AMEX: SDK). Please see our disclosures at the Wall Street Greek website and author bio pages found there.