The Daily Dose: A Threadbare Consumer


Brian Sozzi

 | Jul 15, 2014 | 1:00 PM EDT
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The early read on the Street is that June's retail sales indicate solid footing for the U.S. economy. Here come those gross domestic product revisions! Still, don't be fooled by these numbers, which say that core retail sales advanced 0.6% in June -- better than the consensus estimate for a 0.5% increase -- and that May has been upwardly revised to 0.2%. The fact is that retailers are driving poor-quality sales, and that means risk remains elevated when it comes to investing in the sector.

I know you probably got all hot on beaten-up retailers after reading Barron's this past weekend. But listen to me carefully: Valuations on many otherwise "attractive" retail stocks stand to get cheaper as the industry searches for a bottom in margins. Or, at the very least, wait until the market shows that it can handle, say, Aeropostale (ARO) notching 200 basis points of gross-margin compression and a modest warning on the back-to-school season. In other words, before the sector begins announcing earnings in August, I want to see retail stocks react positively to the bad news we've started to receive....335 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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