Just Not Buying the 'End Is Near' Theory

 | May 20, 2014 | 11:38 AM EDT
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There's just not enough good retail news to outweigh the bad. That's today's judgment, and it is coloring everything. Every day we come to work and make a new assessment of the world. Of course, part and parcel with this is that we immediately forget the old assessment.

Today's assessment is based on the shortfalls in four key retailers -- TJX (TJX), Staples (SPLS), Urban Outfitters (URBN) and Dick's (DKS), the sporting-goods company. I would say the assessment includes Home Depot (HD), too, but Home Depot didn't fit the negative thesis that's been formed by that ne'er-do-well quartet. That's because the giant home-goods and do-it-yourself store took pains to say that May, unlike the weather-impaired months, was robust. For a business like Home Depot, which can have sales carry over into another season -- as opposed to the lost-forever apparel plays -- that is certainly excellent news.

Should we take our cues from the four poorly performing retailers? Boy, is that a tough call, even as I see everyone doing so. Let's break them down, first with Urban Outfitters.

For the longest time this company has missed the earnings mark because of miserable performance at its flagship store. This quarter was no different. But it didn't matter to a soul that the assortment and merchandising at Urban is terrible. No one seems to care that its Anthropologie housewares business is putting up amazing numbers, either. Free People -- the company's haute, sophisticated and expensive teen-and-20s apparel division -- is perhaps the fastest-growing retail arm of any I follow.

Yet all people want to do is draw a conclusion from Urban that this once-great growth retailer is slowing because of a sluggish and hard-pressed consumer.

Next, if we take a hard look at the terrible performance from Staples, we see a company that simply hasn't been able to reap the benefits from the merger of its competitors, Office Depot (ODP) and OfficeMax -- benefits that include some very big store closings. Staples is closing underperforming stores itself. The read-through isn't that Staples doesn't know what it is doing, which is certainly one of my conclusions.

Instead we have the very damning judgment that the small-businessman is not spending. No one thinks that perhaps that businessperson is spending at the new Office Depot, which put up terrific numbers. Nor does anyone seem to factor in the terrific office-supply business that Amazon (AMZN) has. Nope, business is weak because the customer's weak.

Dick's, whose stock is down huge today, has thrown itself on the hunting-and-golf sword -- and even though it called out apparel and footwear as positive, nobody's listening. The stock's being crushed mercilessly on a weak consumer. I say, blame Dick's for a wrong turn on golf and hunting.

Finally there's the weakness in TJX. This is a bad one -- a true disappointment, and very hard to explain, because TJX has been so consistent and CEO Carol Meyrowitz is a phenomenal discount merchant. But you have to wonder whether she has lost business to a resurgent J.C. Penney (JCP). Understand that, when you have 6%-plus comparable-store-sales growth -- which Penney just reported for its fiscal first quarter -- at a chain that does around $12 billion in business per year, that revenue comes from somewhere. I think some is coming from TJX.

That brings me back to Home Depot. Here's a company that I think has the pulse of the homeowner and of the construction business related to home-owning. The company made it clear that the winter really decked the beginning of the quarter. But as sales were made up, it became clear that numbers would not have to be cut. That's all that matters, and I think Home Depot should trump the whole quarter, although I feel very alone in this judgment.

Remember, each day we reassess the whole economy based on whatever meager data we have. I think each day we should reassess the assessment. I just don't think things are nearly as horrible as people are making them out to be. The economy is a continuum. The numbers I heard today were heavily influenced by weather or poor execution. I am just not buying the "end is near" theory that's been gaining steam. I simply think it's business at slightly less than usual -- totally allowable, and not calamitous in any way.

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