Stocks Most Affected By Bad Retail Sales Numbers

In this feature, we discuss Wal-Mart (WMT), Costco (COST), Target (TGT), Macy’s (M) and McDonald’s (MCD).

The consumer makes up over 70% of the economy, so what happens to retail sales is very important.  The news out today is not good.  Keep in mind that the retail sales numbers are presented as nominal numbers, not adjusted for inflation, so in real terms they are significantly worse than discussed below.

• Total retail and food services sales down 1.2% in September from August, down 1.0% from a year ago
• Excluding Auto sales, down 0.6% from August, but up 3.6% from a year ago
• Gasoline sales up 0.1% from August, up 17.8% from a year ago
• Auto Dealers down 4.2% from August, 20.2% from a year ago
• Department stores down 1.5% from August, down 5.3% from a year ago
• August total sales revised to down 0.4% from originally reported down 0.3%

I would stay far away from the retailers, particularly those that focus on the middle class.  The discount stores, like Wal-Mart (WMT) and Costco (COST) might just be able to pick up enough business from those people looking for cheaper places to get their stuff to offset lower overall consumer spending.

This is shaping up to be the worst holiday season since at least the early 1980’s.  If retailers do not have a decent Christmas, they simply have a bad year.

There are too many other worthwhile places to invest your money.  If you have not done so already, get out of stocks like J.C. Penney (JCP), Circuit City (CC), Kohl’s (KSS), Limited (LTD), Target (TGT) and Macy’s (M).

I would also avoid all restaurant socks with the exception of those selling what economists refer to as “inferior goods.”  It’s the same concept as the discounters holding up better than the department stores.  Thus, McDonald’s (MCD) and Yum! Brands (YUM) may do OK.  However, avoid stocks like Darden (DRI), Brinker (EAT), DineEquity (DIN) and Ruby Tuesday (RT).

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