Retailers Getting "Less Worse"

Highlights include Wal-Mart Stores, Inc. (WMT), JC Penney Co., Inc. (JCP), Abercrombie & Fitch, Inc. (ANF) and Target Corp. (TGT)

March retail sales were a mixed bag, with about half of the retailers beating expectations and half meeting or falling short of expectations. Our sample of 20 retailers that report monthly sales had a combined comp-store sales decrease of 1.3% including Wal-Mart (WMT) and decrease of 3.3% excluding Wal-Mart.

Bottom line, sales in retail stores remain weak and profits even weaker. Sales for the first quarter are going to contract versus the first quarter of 2008. Outside of the discounters and a few specialty retailers, the retailers are really struggling. For instance, JC Penney's (JCP) comps were down 9.2%, Abercrombie's (ANF) were down 34%, and even Target's (TGT) were down 6.3%.

Despite the weak results, most retail stocks are higher on today's March sales reports. That's because retail sales, which are still down year-on-year, are not decreasing as fast as they were in the fourth quarter of 2008. In other words, conditions are still weak for retailers, but they are getting "less worse." As in conditions need to get less worse before they can begin to get better.

I agree that conditions are not as bad as in the fourth quarter of 2008, but that
does not mean conditions are going to keep improving. It is hard to get bullish on the consumer and retail stocks when consumers are still under a mountain of debt and unemployment continues to rise.

Read the full analyst report on JCP