Retail Bears Out As Consumers Remain Cautious

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Although weekly jobless claims fell more than expected this morning (down 19,000 vs. expectations of down 7,000), the overbearing concern of high unemployment continues to be present.

With little progress on the overall jobs front, the consumer has ultimately remained very cautious, spurring more tepid spending over the past couple of months. Three weeks ago, many retailers reported very mixed May sales – and those results were far below the stronger sales numbers seen earlier in February and March. Since those May sales reports, the International Council of Shopping Centers also reported that chain store sales have declined in two of the first three weeks in June.

As spending has eased over the past couple of months, retail stocks have notably pulled back. As CNBC’s Matt Nesto pointed out on-air earlier today, the Morgan Stanley Retail Index has hit a 4-month low and is now in “bear territory” – falling 20% from its 2-year high back on April 26.

However, the run-up in retail stocks over the past 19 months has been enormous and shouldn’t be overlooked. The Morgan Stanley Retail Index is still up 140% since bottoming in November 2008 – outperforming almost all other sector leaders in that period.

Other market leaders since November 2008: Airlines up 132%, HMOs up 117%, Semiconductors up 106%. Retailers have also far outpaced the S&P 500 too, which is only up 43% in that period.

In fact, the only major group “outshining” retailers is Gold Stocks , which are up 188% since November 2008 as gold prices have soared 66% to record highs.

Nevertheless, the pullback in retail stocks over the past couple of months has been notable. Three retailers – JCPenney , Barnes & Noble , and Walgreen are even hitting 52-week lows today.

Furthermore, just 20% of the Morgan Stanley Retail Index is up this quarter – and the gainers have essentially been limited to auto dealers and selected discounters/off-priced stores (AutoZone , AutoNation , Family Dollar , TJX , Ross Stores , BJ Wholesale , Dillard’s ).

Here are some of the ugly numbers for individual retailers since their April 26 close: