Retail sales gave investors a reason to cheer Monday. As it turns out, that half-glass-empty take on this sector -- that we'd see a delayed response to the end of the payroll tax holiday -- was just off base. Even the apparel category showed strength despite a less-than-cooperative month from Mother Nature. In fact, to the surprise of many, April apparel showed some of the strongest growth since last February, when summer had shown up unfashionable early.
The good news is that we're now seeing the opposite weather effect. With easier comparisons coming up for the second quarter, and with the potential for a little pent-up demand, investors may be willing to look through first-quarter results and the slew of blame-it-on-the-weather excuses.
Also, despite the rally in the S&P 500 Food & Staples Retailing (RLX) -- and aside from the fully vetted "weather blame game" coming our way -- expectations are not as high as one might think. Target (TGT) set the stage mid-April, announcing that comps would come in at the low end of guidance, once again citing the weather. The stock brushed off the warning.
Meanwhile, Wal-Mart (WMT) is due to report results Thursday. While most investors may not be holding their breath for a turnaround in foot traffic, we may actually hear some positive commentary from management about recent consumer spend. Don't forget that Wal-Mart's customers tend to be highly sensitive to gas prices, which came down $0.14 per gallon in April. The company pointed to those prices last quarter as a pressure, but the decline at the pump just might have given consumers a reason to reach deeper into their wallets.
We're also set to hear from J.C. Penney (JCP) this week. The cat is already out of the bag on the quarter, and comps continue to be painful: Same-store sales declined 16%, coming on top of last year's 18.9% drop. Some are hopeful the June home launch may help the company dig itself out of a hole. The company has lost substantial market share over the past year as customers ran for the exits amid a new strategy, and the company could mollify some of that pain by reversing course and throwing coupons at those customers.
However, I wouldn't count on it. Most recently, the company issued a video campaign to apologize to the customer -- and I thought the delivery here was just as depressing as the spring weather.