This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Retail in Uptrend But Gains Fragile

NEW YORK ( TheStreet) -- The retail sector as a whole is in an uptrend pushing prices near 52-week highs, but spending and consumer confidence remain wary making these gains somewhat fragile.

Most recently, home improvement giant Home Depot (HD - Get Report) posted its first quarterly profit growth in more than three years, beating analysts' expectations and painting a rosy picture. To make things even more appealing, the Atlanta company boasted an increase in same-store sales of 1.2% in the fourth quarter, driven primarily by growth in international markets. As for the future of the retailer, the expected expiration of the homebuyers' tax credit is likely to have an impact on future earnings.

In the department store subsector, Macy's (M - Get Report) swung to a quarterly profit, beating analyst expectations. However, the profitable quarter generated by the second-largest department store chain was driven by cost-cutting measures and not revenue growth. In fact, sales slipped by 1% for the quarter and 6% for the year, indicating that consumers are still reluctant to spend. A similar story was seen in the latest quarterly earnings reports from Sears Holdings (SHLD - Get Report). The department store beat analysts' expectations, but continued to witness a decline in sales, due in large part to dampened demand for home appliances, lawn and garden goods and electronics.

The trend of beating analysts' expectations continued on to Internet retailers as Amazon's (AMZN - Get Report) first-quarter profits rose 69%, with sales increasing nearly 40%. Amazon's Kindle contributed significantly to the company's sales growth and is likely to continue to do so.

Another major retail outfit to witness both revenue and earnings growth was Target (TGT). The company boasted earnings growth of 54% from a year ago, revenue growth of 3% and same-store sales growth of 0.6%. As for the future of Target, the company's outlook seems relatively promising, especially due its recent announcement of being the first bricks-and-mortar retailer to sell Amazon's Kindle and the fact that consumers are still reluctant to spend, boosting the appeal of discount retailers.

This recent outperformance and uptrend in the sector can truly be seen in the performance of the following ETFs:

  • Retail HOLDRs (RTH), which boasts Home Depot, Amazon and Target in its top holdings. RTH is up 37% over last year and is flirting with its 52-week high. The ETF closed at $104.27 on Wednesday.
  • Consumer Discretionary Select Sector SPDR (XLY), which also holds Home Depot, Amazon and Target in its top holdings. XLY is up 57% over the last year, is trading close to its 52-week high and closed at $34.79 on Wednesday.
  • PowerShares Dynamic Retail (PMR) holds retailers like Nordstrom (JWN) and Gap (GPS), two companies that have performed relatively well. PMR is up 32% over the last year and closed at $18.94 on Wednesday.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
RTH $76.23 0.78%
XLY $76.96 0.75%
PMR $39.00 0.65%
AMZN $431.42 1.40%
HD $112.16 1.11%

Markets

DOW 18,162.99 +121.45 0.67%
S&P 500 2,123.48 +19.28 0.92%
NASDAQ 5,106.5930 +73.8420 1.47%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs