On Friday, the Commerce Department announced that retail sales
rose 1% in February, the eighth straight monthly gain and the
largest rise in the past four months. Also notable is that
January's retail sales were revised substantially higher to 0.7%,
up from a 0.3% rise previously reported. Interestingly, economists
were expecting an even bigger gain of 1.3% in the wake of
impressive February same-store sales growth.
However, the University of Michigan/Reuters survey reported
Friday that consumer sentiment declined to 68.2 from 77.2, and
consumer expectations plunged to 58.3 from 71.6. This survey is
very sensitive to gasoline prices, which explains the sudden
I follow the retail report closely as it shows the total
receipts of retail stores, and these changes give good insight into
what people are buying and how willing they are to part with their
In the darkest days of the financial crisis and throughout the
recession, I have recommended, and profited from, retail stocks.
There are some companies that can do quite well in this environment
and can reward smart investors. However, with the increasingly
positive economic news coming out, I don't want you to drop your
guard when it comes to retail stocks. Some of these big-name
companies are still struggling, and just because retail sales may
be positive on the whole, it doesn't mean these companies will
The following are retail stocks to sell in March:
Retail Stock to Sell #1 - Eastman Kodak (EK)
Eastman Kodak Co.
) has been on my hit list for much of the past 12 months, but when
the company broke its promise to turn at least some segments
profitable in 2011, it was the last straw. The company has been
struggling to make the transition from a print photo company to a
digital photo company. In February, the company announced some
awful results that sent the stock into a tailspin. Without a major
turnaround plan, this company is going nowhere.
Retail Stock to Sell #2 - HHGregg (HGG)
) thought it had won the lottery when Circuit City went out of
business, but that euphoria was short-lived. The stock has been in
free fall since late 2010, when the company started cutting
expectations, reporting disappointing sales and was downgraded.
Investors have swooped in to short the stock, and I think that's
the right side to be on with this stock right now.
Retail Stock to Sell #3 - LeapFrog Enterprises (LF)
LeapFrog Enterprises Inc.
) has taken a dramatic nosedive in my grading system in the past
few weeks. It has plummeted from a solid B ("buy") to an F ("strong
sell") in my
Portfolio Grader tool
as inventories stacked up when moms and dads didn't buy junior the
technology-based learning devices the company has to offer.
Children's products are often fads that come and go, and it looks
like this suite of products may be on the outs.
Retail Stock to Sell #4 - Martha Stewart Living Omnimedia (MSO)
Martha Stewart Living Omnimedia Inc.
) has had a rough go since its IPO in 1999, and the results aren't
getting any better. In the just-reported fourth quarter, net income
was down 80% on falling revenue and increasing costs. This is a
deadly combination, and while consumers are more optimistic, I
don't see it translating into significant increases in sales of
Retail Stock to Sell #5 - RadioShack (RSH)
Despite its effort at becoming hip and cool by changing its name
officially to "The Shack,"
) is another stock I wouldn't touch with a 10-foot pole. The
gadgets purveyor has fallen far from its perch as it's been edged
out of its industry by larger electronics stores, like
Best Buy Co.
), and online retailers. In its latest quarter, the company posted
a modest increase in sales, but its earnings declined
year-over-year and missed estimates. Set this stock aside and let
it recharge for a while.
Retail Stock to Sell #6 - Staples (SPLS)
) is another company whose sales are being undercut by online
discount stores. Staples may "got that" when it comes to office
supplies, but its quarterly financial results are seriously
lacking. In its latest filing, the company reported a quite modest
increase of 0.1% in sales and earnings that missed estimates.
Management blamed the winter weather for the poor performance, but
the chilly forecast they should really be focusing on is the one
for the company's stock. Stay away from shares at this time.
Retail Stock to Sell #7 - Avon Products (AVP)
Avon Products Inc.
) claims it can make you rich if you sell its products, but I'm
telling you investing in this retail stock won't make you a dime.
Shares have entered a bit of a free fall ever since the company
announced a 15% drop in earnings and only a small increase in sales
in its latest financial report. AVP may be able to change things
around in the future, but for now, this stock is a strong sell.
Retail Stock to Sell #8 - bebe stores (BEBE)
bebe stores Inc.
), a maker of women's clothing and accessories, didn't make much of
an impression on shoppers this holiday season. That's why the
company lowered its earnings forecast at the height of the shopping
season. Despite discounting its merchandise and offering sales, the
company still posted lower-than-expected earnings and uninspiring
sales growth. Stay away from BEBE at this time.
Retail Stock to Sell #9 - Rosetta Stone (RST)
Rosetta Stone Inc.
) makes language-learning software, and while the company is a
favorite of major government agencies, including the State
Department's Foreign Service Institute, it is not on my top stock
list. The company went public two years ago, just as the market
started its big run, but the stock has failed to gain traction. The
company's latest financial report, which showed a 59% decline in
earnings, only put further downward pressure on shares. Give this
stock some time to learn the language of the market before
investing in it.
Retail Stocks to Sell #10 - Syms Corp. (SYMS)
) offers discounts on designer clothing and is a business that you
think would have done well with frugal shoppers - not the case. The
company has continued to report losses, and while the acquisition
of Filene's Basement has helped the business on paper, the stock is
no bargain right now.