High-End Retailers Could Surge

It's just one month until the early start of the 2009 holiday sales season. The sector is alive and well as we near this important date, with a number of well-known storefronts pressing up to multi-month highs. But uneven progress through the group demands well-honed stock-picking skills and good timing in order to book profits.

A few years ago, seasonal ads didn't hit the airwaves until Thanksgiving, but the date has since been moved to early November by marketing departments in an attempt to increase floor traffic during this critical time of year. Unfortunately, the time shift has yielded negative consequences, because consumers have become resistant to the early advertising barrage, and they understand how it works to their benefit.

Apart from the Black Friday period just after Turkey Day, holiday buyers have refused to pay full price, forcing discounting across the board by early to mid-December. This defensive practice has lowered sales margins, while it cuts into January and February demand. As a result, many retailers now fail to meet revenue expectations and wind up selling off as soon as actual cash register receipts are released after the holiday.

Nordstrom (JWN) -- Daily Source: eSignal

However, the speculative run-up should still be quite vigorous this year, despite paranoia about a penny-pinching consumer. We've seen evidence of this speculative fervor in the last two sessions, with a few retailers taking off and posting double-digit percentage gains. For example, Nordstrom (JWN Quote) has risen more than 3 points this week and is now challenging its rally high near $33. That price level also marks a 52-week high.

The stock needs just 4 more points to make a full recovery from the 2008 crash. That's a great accomplishment, especially considering the adverse credit and consumer environment. It also illustrates one quirk of the post-apocalyptic economy: In a nutshell, upper-scale retailers are performing far better these days than mainline or discount retailers.