Retail ETFs Rise On March Sales But Facts Can Deceive
Investors went on a shopping spree in retail stocks and ETFs Thursday after March same-store sales met expectations and the number of people filing for unemployment benefits dropped sharply, reversing last week's jump.
But the numbers should be put in perspective, a contrarian economist says.
SPDR S&P Retail ETF ( XRT ) surged 2% to an all-time high of 72.95 in heavy volume. The fund holds nearly 100 equal-weighted companies -- both online and brick-and-mortar -- that sell apparel, auto supplies, food, consumer electronics, drugs and specialty goods.
XRT has rallied 17% year to date vs. 12% for SPDR S&P 500 ( SPY ).
Teen apparel sellerZumiez ( ZUMZ ) surged 13% to 28.33, a five-month high, in nearly six times average trade. Its March same-store sales climbed 2.1% over the year-ago period, eclipsing analyst expectations of an 8% drop. Credit Suisse raised its price target while rating the stock neutral.
Department-store discounterRoss Stores ( ROST ) shot up 6% to 63.80, a six-month high. Same-store sales rose 2% year over year, while analysts expected a 1% drop. It guided in the high end of its previously announced earnings range of $1.00 to $1.04 a share for the first quarter.
RiteAid ( RAD ) vaulted 18% to a 52-week high of 2.12 in 6-1/2 times average volume. The third-largest U.S. drugstore chain reported its first annual profit in six years and expects to do so again in the current fiscal year.
Earnings per share for fiscal 2013 hit 12 cents a share. Analysts polled by Thomson Reuters expected EPS of 4 cents. Revenue slipped 2.8% to $25.4 billion vs. analyst forecasts of $25.2 billion.
Rite Aid forecast earnings of 4 cents to 20 cents a share for this year on sales of $24.9 billion to $25.3 billion. Credit Suisse rated the stock outperform and increased its price target owing to strong generic drug sales and health care reform.
March same-store sales overall rose 1.5% from the year-ago period, meeting forecasts, Retail Metrics reported. Harsh weather, Easter coming earlier than last year and higher payroll taxes hurt sales, offsetting the pluses of rising home and stock prices, falling gas prices and modest jobs, the research firm stated in a report.
Retailers have increased same-store sales for 43 months straight. The International Council of Shopping Centers projects April same-store sales to rise 2%-3% in total and 3%-4% excluding drugstores.
Retail sales actually declined after factoring in annual inflation of 2%, said John Williams, an economist and founder of ShadowStats.com. Consumers, whose spending accounts for 70% of the economy, don't have the ability to fuel sustainable economic growth because incomes on average aren't growing faster than the inflation rate.
And consumers can't borrow as much as they used to because of stricter lending standards resulting from the debt crisis, he said.
Weekly jobless claims fell 42,000 from last week to 346,000. But Williams deems that data "absolutely worthless" because the Department of Labor doesn't have the ability to adjust weekly data to account for Easter and Good Friday, and the pace of hiring is slowing. "We're still in the most severe economic contraction since the Great Depression," Williams said.