(By Rich Bieglmeier) Retail Sales numbers have been released for May and the results are mixed to not so hot compared to expectations. The report showed four areas of strength, but for the remaining sectors, not so good.
Consumers opened their wallets and continued to buy cars and trucks at a 1% faster clip than April and 11% higher than May of 2011. This is upside-down compared to economist projections of a slow May for dealerships across the country. In fact, many thought this side of the ledger would be the weakest link. Instead, it was nearly the strongest.
Along with their cars, the folks continued to pile up the electronic gadgets. Electronics & appliance stores gained 0.8 from last month, but down a slight 0.1 year over year. The strength in the sector probably explains why Best Buy Co. Inc.
) has started to crawl off the floor, but not today.
Clothing & clothing accessories stores continued to put in good works as the industry saw a 0.9% gain versus April and 5.4% improvement from last May. In this morning's market brief, iStock highlighted that only two companies Wet Seal Inc.
) and Kohl's Corp
) failed to produce strong same store sales for the emerald month.
The fourth leg of strength is non store retailers, which is primarily attributable to online sales for companies like Amazon.com Inc.
). The group flexed its muscles the most, jumping 1.3% month over month, and a whopping leap of 12.4% in the past 12.
While the overall market is full of weakness, investors would be wise to focus on the few parts of the economy that are showing some signs of strength. More sales, provided costs remain constant, will translate into higher profits, higher profits eventually means taller stock prices.
The opposite is true for the industries that are faltering. The most egregious of which are gasoline stations, minus 2.2% from April, but still 0.6% higher than last year, and Building material & garden equipment & supplies dealers.
The sector that includes the like of The Home Depot, Inc
) and Lowe's Companies Inc.
) is off 1.7% in the 30 days but still a handsome 5.4% ahead of May 2011.
In fact, with the exception of electronics & appliance stores slight 0.1% decline and department stores (ex. L.D. (leased departments operated within department stores)) fell 0.9% year-to-year but were up 0.2% from April to May.
If jobless claims continue to hover around 380,000 and the employment picture worsens, iStock believes that retail sales could continue to slip; however, stores like Dollar Tree, Inc.
), Dollar General Corporation
), and Wal-Mart Stores Inc.
) could fare better than most retailers.
Finally, Peter Lynch suggests using your eyes as a measuring sticks. This author lives near one of, if not the most busy Target Corp.
) in the country. Typically, it's a three or four laps around the parking lot store. For at least the last month, the lot is ½ to 2/3rds full on most weekdays, and only one to two turns for a spot on the weekends. By Mr. Lynch's standard, it could be a summer of retail fails instead of sales.