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  • No News Is Good News By WSS Research Desk 0 comments
    Jan 10, 2013 1:41 PM | about stocks: SHLD, TGT, GME, TIF, AEO, ARO, ASNA

    Carlos Guillen

    Not encouraging this morning was that jobless data for the week continued showed signs of a continuing uptrend, landing worse than expected. According to the Department of Labor, initial claims during the week ended January 5 totaled 371,000, increasing from the 367,000 revised figure reported for the prior week and landing above the Street's estimate of 364,000. While the initial claims' four-week moving average had been trending lower for the prior four weeks, it now ticked higher as well to 365,500, from the prior week's average of 358,750. While it is still early in the month, this trend certainly does not bode well for the unemployment rate this month.

    (click to enlarge)

    Taking a look at the Job Openings and Labor Turnover Summary, or JOLTS report, we can see that the level of jobs available during November is beginning to flatten out. The number of job openings in November was 3.68 million, up from 3.67 million in the prior month, representing a 0.3 percent increase, which is virtually negligible. At the moment the number of job openings still remains well below the 4.26 million openings when the recession began in December 2007; however, the long term view is still favorable with the number of job openings increasing 53.7 percent since the end of the recession in June 2009.

    (click to enlarge)

    Also rather flat was the number of unemployed per job available remaining at 3.3 for a second consecutive month. However, most recently this ratio has held fairly flat, showing very little room for improvement. So while there are fewer layoffs, there is also less hiring going on, and for those that currently have jobs, they are much more unlikely to quit in search for something else.

    (click to enlarge)

    On another note, according to the Commerce Department, U.S. wholesalers' inventories increased month to month by 0.6 percent in November by a seasonally adjusted $499 billion, increasing higher than the Street's consensus of a 0.2 percent rise and representing the fifth consecutive month wholesale inventory levels rose. Given the recent signs of slowing demand, increasing inventories is becoming a risky proposition for wholesalers at the moment, and this may ultimately result in a hit to GDP growth.

    Overall, the Jobs data presented today is beginning to confirm what many already suspect, which is that jobs growth will likely shrink from this year. At the moment investors already expect to see very little improvement in the jobs arena and are focused more on what companies have to say about future business. So far there have been no major shockers, so perhaps no news is good news at the moment, resulting in equity markets up slightly, with the Dow Jones Industrial Average up over 0.3 percent.

    Yellow Flags Keep Waving in Retail
    David Urani

    On Tuesday I pointed out a few yellow flags in the retail space as we head into 4Q earnings season. Those warnings came from Sears SHLD, Target TGT and Gamestop GME. Today the yellow flags keep rolling in with a few more lackluster sales updates:

    * For the two-month holiday period ended December 31, Tiffany & Co TIF posted constant-currency same-store sales as flat. Sales were actually down 2% in the Americas, while being up modestly in Asia and flat in Europe. Fiscal year 2013 guidance now expects earnings to be at the lower end of their previously issued $3.20-3.40 forecast, which would also put it below the $3.31 consensus. Chalk this up as one blemish in the high-end jewelry market.

    * American Eagle AEO is getting plucked after posting sales results for their quarter-to-date that were up a lukewarm 5%, with a 1% increase in comparable stores excluding online. As such, fiscal Q4 guidance is reiterated at $0.54-0.56 versus the $0.56 consensus. In quite a general but indicative comment, CEO Hanson says "the customer and competitive environment was challenging." In other words, soft demand and pricing cuts as we've been noting in the space.

    * The Street is also taking the heat to Aeropostale ARO following a Q4 guidance revision to a meager $0.20-0.24 versus the $0.40 consensus. Comps for the nine weeks ended December 29 were down 8% year over year. Management notes significantly deteriorated traffic following Black Friday.

    * Ascena Retail Group ASNA, owner of Lane Bryant, dressbarn and others, says "the holiday selling season proved to be challenging" (catching a trend here?) and consequentially lowered its guidance to $1.20-1.30 versus the $1.55 consensus. Comparable sales for November and December were down 1% over last year. Management says they will enact markdowns as they head into spring.
    It wasn't entirely bad though, as the holiday horror show could have been sidestepped with superior execution including a strong lineup of goods:

    * Urban Outfitters URBN is the one apparel company to buck the trend today, having reported holiday sales up 15% for November and December with a $666 million mark of the beast increase in sales. Sales were up 10% at the Urban Outfitters name brand. Free People continues to be a growing bright spot, up 33% as that brand brings a highly attractive selection to the more affluent teen crowd. Total comparable sales were up 9%.


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