November Retail Sales Up 6.7% Over Last Year: Consider Buying The Dip

Includes: ANN, DDS, JWN, M, PMR, RTH, TLB, XRT
by: Little Apple

The Department of Commerce reported retail sales for November this morning:

The U.S. Census Bureau announced today that advance estimates of U.S. Retail and Foodservices sales for November, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $399.3 billion, an increase of 0.2 percent (+/-0.5%) from the previous month and 6.7 percent (+/-0.7%) above November 2010. Total sales for the September through November 2011 period were up 7.4 percent (+/-0.5%) from the same period a year ago.

This in itself is news considering that last November there was not an economic downturn. So to be up over last year by 6.7 percent is huge. And to be up over this past October is pretty incredible considering the IPhone 4S was first released on October 14. That release broke so many records that it made Black Friday look like a Monday morning in January.

But the major news is that the retail companies are not responding. It is the Golden Quarter. Everyone is at the mall buying for the holidays. But the big retail stocks opened down today, and have remained down compared to the S&P. Here are several major mall stocks, and how their day went:

Macy's (NYSE:M) $30.71 down $1.61

M vs. S&P 500

Dillards (NYSE:DDS) $46.20 down $0.71

DDS vs. S&P 500

Nordstroms (NYSE:JWN) $46.98 down $1.44

JWN vs. S&P 500

Ann Taylor (NYSE:ANN) $23.91 down $0.62

ANN vs. S&P 500

Talbots (NYSE:TLB) $2.72 down (0.03)

TLB vs. S&P 500

The one exception is Talbots, which although it did close down for the day, it was not down much. It is actually marching to it's own beat considering that it is in the middle of a possible takeover with a $3 bid on the table.

Investors were anticipating a modest increase in November sales when the numbers were released this morning just as the market opened. According to a Barrons Preview written some time ago:

Nationwide economist Paul Ballew thinks the market should react positively to his estimated 6% to 8% year-over-year increase in retail sales.

But that hasn't happened. Rather than open higher almost all of the major retail stocks opened down, and stayed on a steep decline all day. The main reason, I believe is that every article that I saw this morning went a lot like this one by Christopher S. Rugaber, an Associated Press Economics Writer. They begin very upbeat and then at some point they say:

Retail sales rose 0.2 percent in November, the government said Tuesday. That was lower than October's gain, which was revised up to show a 0.6 percent increase. And it was the smallest increase in five months.

When the sales are shown like this, investors assume that these numbers are compared to last year. When in all reality Ballew was right on target with his 6 to 8 percent increase. But I have not seen those numbers in any article today....just gloom and doom! However sometimes this is when you find the best bargains.

So if you are seriously considering a retail stock to invest in, consider this artificial dip as a buying opportunity. I also discuss these same companies in 5 Popular Mall Stocks and Their Short Positions. I will add one note of caution. I used Talbots as a stock in these articles because I have been studying them for quite awhile and have written a lot of articles about the company. However due to the possible takeover by a private equity company, I would use extreme caution in considering the stock.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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