Why Retail Stocks Are Soaring

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It's warming up to be a good year for retailers. Sales data was particularly bright for Target (NYS: TGT) , Gap (NYS: GPS) , and Macy's (NYS: M) as they beat analysts' expectations for the month of March. According to Retail Sails, the 21 stores that have reported saw total net sales climb 6% from the same period a year ago. As you might imagine, same-store sales also spiked higher -- increasing 6.8% with the exclusion of drugstores. Here's a look at who came out on top.  

Discount retailer Target enjoyed stronger-than-expected sales. March comps were up 7.3% ahead of estimates for an increase of just 5.7% for the month. CEO Gregg Steinhafel thanked the early arrival of Easter and unseasonably warm weather for the sales boost. I think Target will continue to surprise analysts with strong performance in the months ahead, which is why the stock has long been one of my top picks in Motley Fool CAPS.

The real shocker was Gap's 8% gain, which nearly doubled estimates of 4.6% according to research from Retail Metrics. This is even more impressive considering that the country's largest apparel chain reported a 10% decline in same-store sales a year ago. Another leader, although less surprising than Gap, was Macy's, with a 7.3% spike in same-store sales for the month. Analysts had expected just 4.8% for the department-store chain.

Let's look at the monthly performance for five of the leading retailers for the March period.


March 2012 Sales

YoY Change

Costco (NAS: COST) $9,130 million9.6%
Gap$1,460 million9.8%
Kohl's (NYS: KSS) $1,815 million5.3%
Macy's$2,358 million6.9%
Target$6,427 million7.9%

Source: Retail Sails.

Discounter Kohl's came in strong, with comps increasing 3.6%, compared with a 6.5% decline the previous year. The retailer continues to open new stores and should be able to maintain its momentum going forward. Meanwhile, although Costco tops the chart in terms of monthly sales, its March numbers fell short of analysts' expectations. The wholesaler missed forecasts for same-store sales of 6.5%, instead posting a mild gain of 6% for the period. I expect Costco to gain speed moving into the summer months, despite the company's slow start.

It's shaping up to be a promising year for retail stocks, and investors are taking notice. Add these stocks to MyWatchlist, The Motley Fool's free tool, so that you can track and monitor their performance in the months ahead.

At the time this article was published Fool contributor Tamara Rutter owns shares of Target. The Motley Fool owns shares of Costco Wholesale. Motley Fool newsletter services have recommended buying shares of Costco Wholesale. The Motley Fool has adisclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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