Wall Street Greek: Retail Chain Store Sales Recovery in Question

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Retail Chain Store Sales were reported to be recovering based on September's sales data reported on Thursday. However, upon closer inspection, we do not see recovery perfectly clear. If you have been reading "The Greek," then you already know why.

(Tickers: TGT, M, JCP, GPS, AEO, TJX, KSS, GS, DIA, SPY, QQQQ, NYX, DOG, SDS, QLD, XLF, IWM, TWM, IWD, SDK)

The International Council of Shopping Centers (ICSC) - Goldman Sachs (NYSE: GS) produced its preliminary report for September's Chain Store Sales on Thursday. According to the ICSC, those sales inched higher by 0.1% in September, offering what its Chief Economist Michael P. Niemera called, "the beginning of recovery."

Retail Chain Store Sales Recovery in Question

Most would use caution in predicting recovery based on such a small increase, and on preliminary data nonetheless! Yet popular media sounded the same song on Thursday, while also inspired by lower than expected weekly jobless claims. Thus, a market that was hungry for a reason to recover, gained ground on the day. The S&P 500 Swindex rose 0.75% yesterday, and the Dow Jones Industrials moved 0.63% higher.

However, your favorite truth-teller, Wall Street Greek, feels compelled to warn you of the shenanigans run amok. The first sales gain since July 2008 got a special boost you see. Labor Day arrived especially late this year, in fact, as late as it could possibly be. School does not start until summer officially finishes though. Thus, "back to school" shopping season extended deep into this past September. We warned about this "pending" event about a month back, but you forgot about anyway didn't you?.. Taking the late Labor Day impact into account, a 0.1% gain does not offer an ounce of enthusiasm. So, we would expect that as the market gains better understanding of this, these resulting gains will dissipate. So now that we have stolen the ICSC's thunder, let's review the store tally.

The September Sales Tally:

Company \|	Ticker \|	September Sales
Target	NYSE: TGT	-1.7%
Macy's	NYSE: M	-2.3%
J.C. Penney	NYSE: JCP	-1.4%
Gap Inc.	NYSE: GPS	-1.0%
American Eagle	NYSE: AEO	No Change
TJX Cos.	NYSE: TJX	+7.0%
Kohl's	NYSE: KSS	+5.5%

Making a Case to the Contrary:

We owe it to ourselves and to you to consider all angles to an issue, and you are always guaranteed to get unbiased opinion from me. I have no interest here; I am not selling anything to you or the companies I'm addressing; nor am I doing any business with the government or anyone who might have an interest in how this story is reported. So here's the other side of the story.

Part of the reason the market grew enthusiastic Thursday was because of a second report. Retail Metrics, Inc. reported that September same-store sales increased 1.1% last month, significantly more than the ICSC noted for September chain store sales. Also, many of the companies reporting their individual sales beat analysts' estimates. In fact, according to Retail Metrics, 70% of retailers reported better numbers than the average figures the statistician compiled from analysts.

Even so, Labor Day falling on September 7, versus September 1st last year, is BIG! It plays a significant role when we are speaking about "back to school" shopping season. It's also very likely that sales that may have not occurred in August, might have led panicky retailers to slash prices and promote products to lure in last minute September sales. So from my perspective, because of the special Labor Day factor, we cannot call the "beginning of recovery" in retail just yet.