Focusing on the Good

You can trade the retailers any way you want, as long as you have an exit plan. From a trading perspective, the long side seems to be netting out okay, if you're able to spread your risk out such that you get two winners (say, Children's Places (PLCE) and Guess? (GES)) to offset your inevitable JCrews (JCG).

You can get long Jos. A Banks (JOSB) on the idea that the company simply has no idea what its results are going to be from month to month. Thus, by some variant of chaos theory you threw together on your PC, you might have been able to predict that JOSB would release earnings yesterday afternoon instead of this morning, as expected.

If you pulled off that JOSB "the company beats and announces it 20 hours early" trade, I've got nothing but monster respect for you. I also suggest you quit while you're ahead.

Dirty Harry and the Discount Play

Men and traders gotta know their limitations as well as their Limiteds (LTD). I don’t want to play specialty when I don’t have a better-than-random guess as to whether or not I’m going to get my head Jcrewed straight off my body. I’m playing the long haul odds and going where the customer is.

The consumer feels poor. It’s fashionable to pay less and that’s working to Wal-Mart’s (WMT) benefit. It may be ironic that the consumer came to Wal-Mart after years of Bentonville’s failed efforts to go upstream but irony isn’t actually a trading strategy. In the here and now, WMT is giving the customer exactly what they want. After a decade of WMT stock marking time, just about anything above GDP is good enough to keep WMT on the uptrend.

That’s good enough for me.

So, what did we learn from SSS this month? We learned that specialty is noisy but a tick better than expected but nothing much else has changed from last month. Expectations are low. Wal-Mart and Costco (COST) beat by a tick. May seem a dull way to play but that has some appeal to me on the trading side.

My position is Wal-Mart, my thesis seems in tact and my exit plan is to stay long unless the consumer gets better or Wal-Mart stops executing. I see no evidence of either happening in today’s results.