Rob Black's Retail Stock Report

Retail sales in the U.S. rose more than previously forecasted last month, led by the purchase of cars, electronics and building materials that show consumers are taking higher gasoline prices in stride. The 1.4 percent increase was the biggest since January and followed a 0.4 percent drop in June. The rebound in sales showed the economy may not slow down as much as Federal Reserve policy makers expect, raising the risk of accelerating inflation. Wage growth is providing the thrust for spending, which slowed last quarter. The consumer is always more resilient than you expect. Retail sales account for almost half of all consumer spending, which in turn represents about 70 percent of the economy. Spending has slowed after rising in the first quarter at the fastest rate since the third quarter of 2003. Even with the larger-than-expected gain in July sales, the challenges of higher fuel costs and a slowdown in the housing market may keep spending from accelerating much through yearend.

Movie Gallery (MOVI) shares were off 54% yesterday. While a 1st quarter earnings report suggested to some MOVI had perhaps hit a positive turning point, 2nd quarter results clearly brought things back into perspective. That is, rental industry trends continue to be weak and Movie Gallery is losing significant share. Exacerbating MOVI's distress is an unsustainable debt burden.

Red Robin Gourmet Burgers (RRGB) expects profit, excluding some items, of $1.74 to $1.83 a share this year. Tom Coughlin, the former Wal-Mart vice chairman who admitted to stealing thousands of dollars from the company, was sentenced to 27 months of home confinement. Coughlin had faced up to 28 years in prison and $1.35 million in fines. Coughlin said he would spend the rest of his life trying to undo the damage he had caused.

Target (TGT) reported 2nd quarter 2006 EPS of $0.70 versus last year’s $0.61 which was in line with estimates. Gross margins were up slightly while SG&A de-levered. EBIT margins at the retail division were down 16-bps but strong credit trends help drive total operating margin expansion of 30-bps. Credit contributed to 19% of the operating income vs. 14% last year. Receivables increased in line with sales. Delinquencies are rising, as expected, but Target is adequately reserved.

Parlux Fragrances (PARL) plunged 37 percent, the maker of Paris Hilton and Andy Roddick colognes, said in a statement filed with the SEC it delayed filing its form 10-Q and second-quarter profit may be as much as 5 cents a share. Analysts expected 22 cents.

Pacific Sunwear of California (PSUN), retailer of casual apparel and footwear catering to teenagers, said it may earn 22 cents to 30 cents a share in the third quarter. Analysts expected 49 cents, on average.

Rent-A-Center (RCII), the largest U.S. rent-to-own retailer, will pay $4.95 million in a settlement with about 6,000 employees who had alleged violations of wage and hour laws in California, the company said in a statement.