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Retail Round-Up: Sell in May, Then Go Away


Another eye-poppingly ugly month, and investors aren't happy.


Uncle JeffMacke is stuck on a plane right now, so he asked me to give you the report on same-store sales results. Taking a peek at the numbers, it's another eye-poppingly ugly month, and investors are clearly showing their displeasure for the whole sector. It seems as if the old Wall Street Mantra of "sell in May and go away" is working - for retail, at least.

Anyway, here's what I deduce from the figures:

  • You know it's tough when a company blows away expectations and it still gets treated poorly. Aeropostale (ARO) said same-store sales surged 19%; analysts were expecting a 10% gain. With those kinds of numbers. investors should be happy - but shares are currently down 2%.

  • On the flipside is Saks (SKS). The results for this retailer were awful. Saks turned in a negative 26% performance; analysts were looking for a 13% decline. But the stock is only off 1.5%. I recently read a note that even if the high-end customers were to stay constrained, this company could still see its margins expand thanks to cost-cutting and managing inventory. My comment? Hardly an exciting reason to be invested.

  • What's even stranger to me is Abercrombie & Fitch (ANF). It turned in awful results, which the Street was pretty much expecting. Nonetheless, Abercrombie bulls are taking a beating, with shares down 12%, putting the stock on the list of one of the worst performers of the day.

  • In down days like this (for retail, at least), you can take hints as to which stocks will be the leaders. Wal-Mart (WMT), Kroger (KR), even Mickey D's (MCD) aren't really getting hit that much, and when the mood lifts, these shares could outperform its brethren.

  • But remember: Much of a stock's move is due to the sector it's in. And I continue to think a lot of consumer pain looms ahead with higher commodity and food prices, and increasing unemployment (we'll get more on those numbers tomorrow morning). Just what retail stocks need during their slowest times of the year. So remember to set those stops.

  • With that, I'm off to try and pick up a new shirt for Uncle Charlie's Rollin' Bones show at the Red Lion. Meet us there tonight if you're in the neighborhood!

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No positions in stocks mentioned.

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