Retailers Fossil and Abercrombie Tumble

Retailers Fossil and Abercrombie Tumble

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Earlier in today's session, the Dow Jones Industrial Average hit an all-time intraday record high of 15,732, before pulling back. As of 1:15 p.m. EST the index is up 103 points, or 0.66%, to 15,721. The cause for the jump is difficult to explain; little economic data was released this morning, and none of the Dow components reported earnings last night or this morning. Furthermore, the move is not spread across the markets: The S&P 500 is only up only 0.3%, while the Nasdaq is actually down 0.28% this afternoon.

A few big winners and losers
Shares of fashion designer Fossil are down 5.2% today after the company reported third-quarter earnings in which it beat analyst expectations on both the top and bottom lines. Despite the win, the company lowered its revenue and earnings guidance for the fourth quarter to a level below what analysts had expected. While a 5% drop may seem a little rash after beating this quarter, some of the move can be attributed to the 3% rise the stock enjoyed yesterday after Michael Korsreported earnings. The two companies work together on a number of items, so investors believed that if Kors performed well, Fossil would follow suit, making for a slightly irrational share-price gain that was given back (and then some) today.

Another retailer getting hammered today is Abercrombie & Fitch , which has fallen more than 11% after the company released a revised forecast. While analysts had expected the company to report earnings of $1.95 per share, A&F now believes EPS will fall in the range of $1.40-$1.50 for the year ending in January. The reason given for the revision was that younger shoppers are slowing their spending. The teen retail space is a challenge, as that age group is constantly changing styles and preferences. Only investors who have a high risk tolerance should attempt to profit from this sector.

On the other side of the coin is Ralph Lauren , which is up more than 4% today after the company reported earnings and lifted its full-year revenue forecast. The company posted a 3% climb in sales, while net profit slipped 4% to $2.23 per share. The company believes that revenue will increase by 5% to 7% during 2014, raising its forecast from a 4% to 7% growth rate. Lastly, the fashion icon increased its dividend by 12.5% to $1.80 per share.

The world of retail is hard to crack, and predicting which company will make it this year or next is extremely difficult. But investors who are patient, buy at the right times, and don't act irrationally can realize market-beating returns by investing in the sector.

Who Will Rule Retail?
To learn about two retailers with especially good prospects, take a look at The Motley Fool's special free report: "The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail." In it, you'll see how these two cash kings are able to consistently outperform and how they're planning to ride the waves of retail's changing tide. You can access it by clicking here.

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Fool contributor Matt Thalman owns shares of Michael Kors. Check back Monday through Friday as Matt explains what causing the big market movers of the day, and every Saturday for a weekly recap. Follow Matt on Twitter @mthalman5513. The Motley Fool recommends Fossil. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Originally published