Retail Is Saved by the Bell

 | Aug 19, 2014 | 11:33 AM EDT
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Looks like the rotating correction that laid low retail is now a thing of the past thanks to Home Depot (HD), TJX (TJX) and Urban Outfitters (URBN).

Now all three of these are different kinds of stories. We had three analyst pushes of Home Depot going into the quarter, similar to what happened with Macy's (M), but this time Home Depot delivered such a good, clean quarterly beatdown of the estimates that the analysts turned out to be conservative. Given that it was a "late" spring because of the weather, CEO Frank Blake and his team did a remarkable job coming from behind to create a superb quarter. Home Depot is winning the hard goods war for certain, although sales were so bountiful it is hard to see Lowe's (LOW) doing a really poor job when it reports tomorrow. .

Urban is a case where the numbers have been so bad for so long that to get any respite from the underperforming division, namely the flagship Urban Outfitters, is fabulous news and that's how people are viewing it, hence the rally. Anthropologie was its same Williams-Sonoma (WSM)-like self, Free People was, as usual, spectacular, but just the hint that the ailing flagship brand came into the next quarter without heavy inventories and with some better sales numbers was enough  to inspire the faithful to reiterate Buys or pound the table once more for the organization. It worked.

There was a time that I wouldn't be satisfied with the slight beat of the estimates that TJX gave us, but when a high-quality global retailer goes to $52 from $62 it has some real room to run on a 2% comparable-store rise. TJX is the most consistent of the retailers I follow, which is why the inconsistency of the last quarter seems aberrant today, which is why we get the justifiably large rally in the stock.

These numbers plus the battle for Family Dollar (FDO) remind us that we focus too much on Wal-Mart (WMT) and Target (TGT), which may be the sources of much of the traffic for many of the stores that just reported better numbers. I have been adamant that both have lost their way in that they neither seem clever nor intriguing as places to go, something that you have to be unless you offer prices so low that they are obviously cheaper than everyone else.

But neither Target nor Walmart are dollar stores, so they can't compete with that rubric. TJX is known for its clearance sales -- other peoples' clearance. Competitor Costco (COST) delivered terrific numbers, but wasn't given credit for them when it reported. I sense it will now. That's a clearance store and a warehouse store with a treasure hunt feel taking customers away from Target and Wal-Mart. Judging from the sporting goods numbers that Dick's (DKS) reported -- another upside surprise  chiefly because the company's finally putting up the white flag for golf -- Target and Wal-Mart aren't getting those customers either. And let's not forget Amazon Prime delivering the goods that Wal-Mart and target formerly may have provided you at a price point that's better with in-home delivery.

Hmmm. Appliances, clothing, sporting goods, electronic goods, geez ... it's hard to see where Target and Wal-Mart can make a comeback.

The disappointing outliers are Macy's and Nordstrom (JWN). The latter was clearly a question of technology spending to keep up with others in a way that's making shareholders restive. But the former is all about JC Penney (JCP) revitalization, where there were as much as $5 billion in sales up for grabs that were lost and some of that its finding its way from Macy's to Penney, where it was before the disastrous Ron Johnson reign.

Overall, it looks like investors, buoyed by some good housing numbers, lower rates and dramatically reduced gasoline and electric bills are spending again. The correction to this key group seems over. It's just one more segment that looked like it was rolling over that was saved by the bell of some very good quarters when we least expected them. 

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