Consumer optimism seems to be back
The consumer sector is turning out to be somewhat stronger than expected, according to September retail sales. The consumers pulled back sharply in September—but it was mostly due to the post-"clunkers" drop in auto sales. Overall retail sales in September dropped 1.5% after a 2.2% spike the month before. The decline was led by a 10.4% plunge in auto sales after a 7.8% boost in August. But outside of autos, sales were mostly healthy. Excluding motor vehicles, retail sales advanced 0.5%, following a 1.0% jump in August. In fact, we now have had two months of unexpectedly healthy core sales. Apparently, the consumers that have jobs are a little more optimistic and are willing to spend. So, excluding auto stocks, other should have done well in the recent past. Confirming our expectation - food retail was one of the top-performing S&P 500 industry groups for Thursday (October 15, 2009) with KR, SVU, SWY, WMI showing major gains. In fact, after hitting a low of 228.82 on March 6, 2009, the S&P Retail Index has registered an annual gain of 116.9% to touch 393.03 on October 16, 2009. This should be tempting for us to pick favorite stocks in this sector.
Our retail stock universe
We have excluded retail wholesale auto & trucks, retail wholesale computers, retail - drug stores, retail – building products, and retail - wholesale auto parts. Even after excluding these sub-sectors, our stock universe of 207 retail stocks consists in 11 sub-sectors namely Apparel & Shoes (43), Consumer Electronics (7), Convenience Stores (4), Discount Stores (14), Home Furniture (5), Jewelry (5), Mail Order (13), Misc & Diversified (36), Regional Dept Stores (7), Restaurants (57), and Supermarket (16).
We will give equal weightage to all the sub-sectors and pick the top two in each subsector to pick the final seven. The top two in each sub-sector will be based on YTD (Year to Date) performance. However, we don't consider penny stocks. Thus we have, TALBOTS INC, and CHICO'S F A S I from Apparel & Shoes; HHGREGG INC, and B REX STORES CP from Consumer Electronics; CASEYS GENERAL, and SUSSER HOLDINGS from Convenience Stores; T J X COS INC, and BIG LOTS INC from Discount; KIRKLAND'S INC, and WILLIAMS SONOMA from Home Furniture; SIGNET JEWELERS, and TIFFANY AND CO from Jewelry; HSN INC, and NU SKIN ENT INC from Mail Order; BOOKS-A-MILLION, and BIG 5 SPORTING from Misc & Diversified; DILLARD'S INC, and MACY'S INC from Regional Dept Stores; CARIBOU COFFEE, and O'CHARLEY'S INC from Restaurants; AMCON DISTRIBUT, and WHOLE FOODS MAR from Supermarket.
Eliminations
SUSSER HOLDINGS is eliminated as YTD is in negative.
