Despite overwhelmingly underwhelming sales reports earlier this month, and even as consumer confidence bounces around, and even as long-term unemployment steadily rises, overall retail sales somehow managed to be good. It makes me wish there was a bit of punctuation that was both a period and a question mark. Sales excluding autos and gas rose 0.4% in February, which beat analyst expectations, according to Bloomberg. That increase came on the back of a small increase in January and is being heralded as showing the “underlying strength ” in the economy.
Not surprisingly, investors are yet to be impressed. After more than a week of rallying, it seems that it takes more than a slightly positive outlook to get retail stocks to budge. The Gap Inc. (NYSE:GPS) , Target Corporation (NYSE:TGT) , and Michael Kors were all just ahead on the day, while Limited Brands, Inc. (NYSE:LTD) and Williams-Sonoma, Inc. (NYSE:WSM) were down.
The befuddlement of the market poses the question, “Do macroeconomic trends mean anything anymore?”
The confusion of the market
Often, these sorts of reports will move one end of the retail stock market, pushing luxury goods or apparel up, for instance. That’s not the case today, as the contrast between Kors and Williams-Sonoma, or The Gap Inc. (NYSE:GPS) and Limited Brands, Inc. (NYSE:LTD), highlights. Today, everyone is just out there trading as if nothing new has happened. In a sense, that’s what’s driving the confusion in the market — nothing new has happened. February sales figures are in the past, and most companies have already reported on those sales if they’re going to.
The Gap Inc. (NYSE:GPS) and Limited Brands, Inc. (NYSE:LTD) both had 3% increases in comparable sales in February, with both brands continuing strong runs. The new retail report won’t change those already reported outcomes, nor will it affect the softness in consumer sales in China that dragged down Kors earlier this week. But that doesn’t mean that investors should completely ignore these reports, as they provide an insight into future growth.
What’s coming up next?
February’s report included a revised forecast for U.S. spending over the next quarter, and suggested that it was going to be stronger than anticipated. That growth is going to be driven by an increase in inventories that analysts expect will fuel sales. The dramatic increase — the largest since 1995 — is certainly evidence of optimism from businesses, though it remains to be seen if that optimism is justified.