January 12, 2012
After weeks of remarkably steady economic data for the U.S., today brought in a few reports that reminded us that we’re not out of the water yet.
The big one was that December retail sales only climbed 0.1% instead of the expected 0.3% gain. This was a bit disappointing, especially considering that December was the biggest surge in consumer credit in eight years.
It looks like that consumers may have bought their holiday purchases early this year in all the Black Friday madness, considering that November’s sales were revised higher and sales of consumer electronics—always a popular holiday gift—was the big drag on the overall numbers in December. So while this was a relatively disappointing report, it merely means that the economy will have some misfires on the way to improvement. Plus, I’m hoping that this figure will be revised higher next month like we saw with November’s data.
And it’s also important to remember that not all retailers fared poorly during the season. While sales at retail powerhouses like Target (TGT) and JC Penney (JCP) remained flat—not to mention the decline in December sales at Gap Inc. (GPS) and Kohl’s (KSS)—other retailers did quite well this holiday season.
Retailers that catered to mid- and higher-end clientele, such as Macy’s (M) and Limited Brands (LTD) posted a significant jump in same-store sales in December. And discount name-brand apparel specialist Ross Stores Inc. (ROST) also did well in December, upping its fourth-quarter earnings guidance on double-digit revenue growth and stronger sales in the holiday season.
The lesson here is that there are going to be plenty of bumps along the way in the retail sector, and it’s important to separate the wheat from the chaff. I’m expecting that 2012 will be a stock picker’s market, and there will be a widening gap between the winners and the losers.
As the market narrows in 2012, be sure to use all of the tools at your disposal. A great place to start would be my PortfolioGrader tool, where I assign letter grades to more than 5,000 stocks and highlight the best stocks by sector, fundamentals, and volatility ranking. So good luck, and be sure to stay tuned to this blog as I cover the latest economic news as it rolls in.