Since September 2004, the S&P Retail Index has been caught in a sideways consolidation channel at between 400 and 500, unable to establish a sustainable trend in one direction or the other. During that time, the monthly retail numbers have been largely mixed. But in January, the retail data (excluding auto) was impressive, showing growth of 2.20% versus the estimate of 0.8%. It was the strongest reading in years.
Yet the initial optimism appears to be fading after seeing mixed reports from the nations retailers on Thursday. The early data suggests that same-store sales growth will be sub par compared to what we saw in January.
The reading in January may have been an aberration because of warmer than expected temperatures. The surfacing of cold weather in February apparently sent a chill through the pocketbooks of consumers. Also, the strong January sales may have taken away from spending in February.
The reality is the absence of a positive trend in retail makes investing in retail stocks more of a risk. You need to pick the right company. Even bellwether stocks such as Wal-Mart Stores (WMT) are struggling as far as its share price in spite of some...
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