With consumer spending reported over the past year by the economy that sank, Massive PHK, and the price of Tanking Houses, Investors relating to the financial health of retail stores. At the beginning of the second quarter earnings season, conventional wisdom believes that off-price retailers will run well while luxurious retailers will be beaten because consumers focus on prices and needs.
Second quarter report card
Most retailers now report their second fiscal quarter income. Many investor assistance, income is not as bad as feared. Offseting a sharp decline in sales with closure of stores, cutting inventory, and other cost reduction measures most retail stores beat the second quarter income estimate.
While the industrial benefits declined for the ninth consecutive quarter, a 8% decline in the second-year-old quarterly income of less than half the magnitude was estimated at the depth of recession at the end of March.
There are some surprises too. Discounter Wal-Mart (WMT) reported the results of HO-HO while the target of competitors (TGT) exceeded analyst estimates with almost 20%. In the upper class retail, Nordstrom (JWN) reported earnings in accordance with the estimated analyst while Saks (SKS) lost less than the feared.
Among the retail store building materials, Lowe (low) disappointed during the Home Depot (HD) no. In the Department Store, Kohl’s (KSS) reported a profitable quarter while the results of J. C. Penney’s (JCP) was damaged – even. Dillard’s (DDS) Bled red ink at a lower level than expected as the same shop sales decreased for the 12th consecutive quarter.
What is for retail retailers and shares
The retail industry income seems to have been stabilized even at a low level. Retail shares measured by the S & P Retail Index (RLX) rose by almost 24% since January 2, beyond the 12% S & P 500 gain.
Many heads of the retail industry are careful in their views. There are several signs that consumers will quickly increase their discretionary expenses. Unlike previous recessions, consumers do not depend on credit cards to finance their expenses. For one, consumers do not use and save more income. Second, financial institutions have raised loan standards and reducing credit limits.
The back-to-school shopping season has been relatively quiet so far. There may be some hope here but because some countries go on ‘tax holidays’ this weekend.
On the brighter side, retail shares also have several factors that occur for them.
Comparison of year-on-year sales for retailers stand up to be easier in the coming months. Retailers do not have to be in accordance with sales driven by stimulus checks last summer. Furthermore, the steep decline in the sale of crater retail during the fourth quarter of last year had to help with comparison.
After a positive income surprise in the second quarter, analysts have raised their full year’s revenue estimates for many retailers.
Investors with a dose of healthy risk tastes can find some interesting opportunities in the retail landscape.
Two mutual funds
Investors of mutual funds cannot see load funds such as Fidelity choose Retailing (FSRPX) and Rydex Retailing (Ryrix).
In the ETF room, SPDR S & P Retail (XRT) is a popular choice among investors. Other options include Powershares Dynamic Retail (PMR) and Merrill Lynch Retail Holdrs (RTH). Technically, RTH is a trust unit that trades on the stock exchange.
Investors looking for stock ideas can consider Kirkland’s furniture retailers (Kirk) and 99 cents discount retailers only shops (NDN). Both companies have collected a series of impressive positive income surprises in a challenging retail environment. Kirk and NDN are retailers who have passed the zack stock screen for ‘two consecutive 10% or more positive surprises’. Kirk trades on P / E forward around 15 while NDN shares that are less easily evaporated change hands on 19x forward P / E.