The Zacks Analyst Blog Highlights: Best Buy, Walgreens, Pfizer, Amazon and Fed Ex - Press Releases

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For Immediate Release

Chicago, IL - December 14, 2011 - announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Best Buy ( BBY ), Walgreens ( WAG ), Pfizer ( PFE ), Amazon ( AMZN ) and Fed Ex ( FDX ).

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Here are highlights from Tuesday's Analyst Blog:

Retail Weaker Than Anticipated

Total Retail Sales rose 0.2% in November on top of a 0.6% rise in October. Relative to a year ago they are up 6.7%. While the number is not adjusted for inflation (it is for seasonality and holidays) it is still a solid year-over-year showing. For the month, however, it was well below expectations of a rise of 0.6%. The disappointment is only partially offset by October being revised up from 0.5%.

Retail sales are a very broad measure of consumer spending, not just what is going on at the malls. What happens on the car lots can make a big difference. Excluding auto sales, the number was up 0.2% for the month after rising 0.6% in September are up 6.6% year over year. The ex-autos number was also than the expected rise of 0.5%. Sales at the auto dealers and parts dealers rose 0.5%, but that is after a 0.8% surge last month.

On a year-over-year basis, sales are up 7.5%. Before placing too much emphasis on this report, though, you have to realize that it is often heavily revised, especially at the individual store level. Not great data, but it is what we have to work with and consumer spending is vital to the overall economy.

Looking Beneath the Headline Numbers

For most of past year, the rise in retail sales has been led by something that is not really good news: higher sales at gas stations. Remember this data is not adjusted for inflation, and the actual consumption of gasoline is down year over year. It is all about higher prices at the pump. That was not true this time around, as gas station sales fell 0.1%, the second month in a row of declines following October down 0.4%.

Over the last year, however, sales at the gas stations are up 12.9%, almost double the overall rise in retail sales. That suggests that headline CPI might be lower than core inflation when it is released on Friday. Sales at grocery and other food stores were down 0.2% after rising 0.7% last month, and year over year are below the overall level of retail sales with a 4.6% rise.

People more or less have to spend money on food and fuel, and thus changes in sales tend to reflect changes in prices more than changes in volumes sold. At grocery stores, it could reflect changes in the mix of food sold -- more mac and cheese, say, and less steak -- but I doubt everyone went on a diet in November. Thus I suspect it has more to do with prices.

In gauging the health of the economy and the real mood of the consumer (as opposed to the consumer sentiment and confidence surveys) it is worth looking at how the more discretionary areas of retail sales are doing. It is much easier to put off the purchase of a new sofa or washing machine than it is to put off going to the grocery store, or refill the tank when you are running on fumes.

The more discretionary categories were mixed, as they were last month, but those that did well last month were soft this month, and vice versa. Furniture is perhaps the most discretionary of all the categories. It showed a 0.4% rise on the month, but that was after a 0.5% drop in October.

The story at electronics and appliance stores like Best Buy ( BBY ) was very different, with a 2.1% surge in November on top of a 3.3% rise in October. However, we also saw Best Buy disappoint this morning with its earnings. The Black Friday lines were longest at Best Buy as it was very promotional. Thus sales were good, but margins were awful.

Sales at drug stores like Walgreens ( WAG ) were down 0.1% on the month, after a rise of 0.4% in October. Over the last year they are up just 3.0%, the smallest of any group. Those sales are in the non-discretionary camp along with sales at grocery stores. That might reflect the increasing share of generic drugs as many of the biggest drugs, such as Pfizer's ( PFE ) Lipitor have come off-patent. It might be a sign that we are starting to get health care inflation under control.

The weakest group for the month are impossible to categorize as discretionary or non-discretionary: the miscellaneous store retailers. They saw a 1.2% drop in November, more than reversing the 0.4% rise in October, but are up 7.7% year over year.

The strongest year over year sales gains have come from the non-store retailers such as Amazon ( AMZN ), with a 13.9% rise. They surged this month by 1.5% after a rise of 2.6% in September. Clearly they seem to be gaining market share. That does have negative implications for state and local sales tax revenues, but it is good news for shippers like Fed Ex ( FDX ).

Weak, Any Way You Slice It

Overall I would have to rate this as a disappointing report. It was much weaker than expected both before and after stripping out autos sales. Only seven of the 13 types of stores saw increases on the month.

Year over year all 13 types of stores are showing increases. However, most of the weakness was in the non-discretionary sectors, and that suggests to me that it is more about low levels of inflation rather than a huge pull-back by the consumer.

Even where sales were strongest, in electronics, other evidence suggests that it was about the retailers being very promotional. From the bottom, overall retail sales are now up 20.0% and are 5.5% above the pre-recession peak, but remember, these numbers are not adjusted for inflation, which suggests that real sales are still well below the start of the Great Recession/Lesser Depression.

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WALGREEN CO ( WAG ): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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