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With the RTH up about 32% over the past 6 months, how should you trade retailers through the end of the year?
On Thursday investors will be sifting through the latest same-store sales results for clues about how to trade going forward.
The results could really move the sector because retail stocks have rallied sharply since early March, helped by cost cuts that offset falling sales.
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Investors will now be looking for signs that consumers, who account for about 70 percent of U.S. economic activity, are starting to open their wallets again.
“It's going to be watched very closely," Ken Perkins, president of Retail Metrics Inc, says. Investors want to know if discretionary spending picked up last month.
But it’s not just past spending trends that matter. Investors will also be trying to interpret what the results suggest about the all-important holiday shopping season, which is right around the corner.
“Back to school should be a good barometer for holiday,” Citi retail analyst Kimberly Greenberger tells Fast Money. "Historically we find there's up to a 65% correlation between back-to-school and holiday sales."
"If there is an uptick, then the holiday season could have a chance at a modest season, not just an absolutely terrible one like (retailers) had last year," Perkins says.
So what’s the number to beat? On average, analyst expect to see a decline of 3.8 percent in sales at stores open at least a year, according to Thomson Reuters data.
Anything better than that should be viewed positively.
And if the numbers come in weaker than expected don't write off the holiday season just yet. "This year we may have to wait for September sales (to make a determination about the holidays). With a later Labor Day a solid portion of back-to-school sales are being pushed into September," reminds Greenberger.
In other words the two months may have to be taken together before the data becomes meaningful.
In the meantime what's the best retail trade?
Our favorite retailers are Urban Outfitters [URBN
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] and J. Crew [JCG
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], says Greenberger. Both retailers are out-executing the competition. However retailer are likely to consolidate in the near term before moving higher so I think you can ease into both stocks over the next 4 to 5 weeks, Greenberger counsels.
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Trader disclosure: On Sept. 2nd, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Terranova Owns (AMZN), (FCX), (QCOM), (POT), (WFT), (SU); Terranova Is Short (TM); Terranova Owns (GS) Puts; Terranova Owns Gold Futures; Terranova Works For (VRTS); Finerman Owns (RIG); Finerman's Firm Owns (MSFT), (NOK), (WMT), (RIG), (TGT); Finerman's Firm Owns (WFC) Preferred Shares And Is Short (WFC), Finerman Owns (WFC) Preferred Shares ; Finerman's Firm Owns (BAC) Preferred Shares, Finerman Owns (BAC) Preferred Shares And Owns (BAC); Finerman's Firm Is Short (USO), (IJR), (MDY), (IWM) ; Finerman's Firm Owns (AXL) Calls; Najarian Owns (BAC) & Short (BAC) Calls; Najarian Owns (BUCY) & Short (BUCY) Calls; Najarian Owns (FCX), Owns (FCX) Put, Is Short (FCX) Calls; Najarian Owns (JPM) & Is Short (JPM) Calls; Najarian Owns (MS) And Is Short (MS) Call; Najarian Owns (MSFT) And Is Short (MSFT) Call; Najarian Owns (MOS) Call Spread; Najarian Owns (PALM) Calls; Najarian Owns (TXT) Call Spread; Najarian Owns (TEVA); Najarian Owns (V) & Short (V) Calls; Najarian Owns (WFC) Put Spread; Najarian Owns (YHOO) Calls; Najarian Owns (IPI) Calls; Najarian Owns (OXPS) Calls
Gartman's Funds Are Long Gold In Terms Of Currencies
For John Hyland:
Hyland is Sponsor & General Partner of USO, UNG, USL, UGA, UHN
For Kimberly Greenberger:
A suit by AEO against Citigroup Is Currently Pending in Federal Court
Citigroup Owns (ARO)
Citigroup has received compensation from (GPS)
Citigroup has received compensation from (JCG)
Citigroup has received compensation from (LTD)
Citigroup has received compensation from (PLACE)
Citigroup has received compensation from (AEO)
Citigroup has had (AEO) as a client in past 12 months
Citigroup has had (GPS) as a client in past 12 months
Citigroup has had (JCG) as a client in past 12 months
Citigroup has had (LTD) as a client in past 12 months
Citigroup has had (PLACE) as a client in past 12 months
Data is a real-time snapshot *Data is delayed at least 15 minutes