Thursday, January 7, 2010

1/7/10 Midday Report: Low end retailers post good sales numbers as formerly rich learn to slum it

Before we get to the better than expected December sales numbers for most retailers, we need to address the macroeconomy (So hello macroeconomy, would you like some viagra for your slow growth?).  Today's initial claims for unemployment came out and were slightly better than expectations (and all sources tend to agree about this, unlike yesterday's free for all where there was less agreement by news sources about expectations than there is typically agreement by Bjork's stylists).  There were 434k newly filed claims, up only 1k from last week, so that is a slightly positive sign (though not as positive as this sign).  However, analysts/economists/reporters/Bea Arthur are overlooking the fact that those who are unemployed are remaining unemployed for longer as claims for extended unemployment benefits climbed by 165k to 5.44MM (and I can understand how Bea Arthur overlooked this fact since she is not an economist, and dead, but the the others overlooking this puzzles me a bit).  Anyway, the data has continued to show that those with jobs should become less worried and those without jobs should become more screwed as the chasm between the haves and have nots gets wider than Jessica Simpson's cleavage.

In other macro new today, China is raising a key interest rates as they move closer to admitting that inflation may be a problem (which is a bit like the first mate of the Titanic telling Edward Smith that the upcoming icebergs may case some slight turbulence).  The dollar is bouncing up a bit on this news as gold and commodities tick down.

In stock news today, retail sales came out for the most part stronger than expectations and retailers, led by Sears, Macy's, The Limited Brands, and BJ's Wholesale Club, upped their earnings estimates.  BJ's said they would have had double the 2.7% growth if not for the snowstorms in the Northeast and the computer viruses people got when inadvertently going to (instead of the actual company website and learning it wasn't really the place to buy footlong packs of Tums (though it was the place to see many other things that were a foot long).  Sears is having a huge day as KMart showed a 5.3% increase in sales thanks to toys and home goods and they raised Q4 estimaes to $3.36, much higher than analyst estimates of $2.75.  Eddie Lampert hopes this can stave off the 2 year Blue Light Special on his SHLD shares.

It wasn't all champagne and hummers for the retail sector though as specialty retailer HOTT showed a 10% drop in same store sales as their market strategy may be reaching it's twilight (for those of you who don't follow HOTT, the last line is punny because they rely on sales of crappy t-shirts from that movie Twilight to drive business.  Hit me up in the comments section if anything else needs explaining).

And in small cap news, CRTX came out today with revenue estimates for 2010 of $115MM, almost exactly what Money McBags said a few short days ago.  In fact, Money said "this company could easily do $115MM of revenue in 2010 (maybe $130MM at the top end)."  This new guidance looks like that $115MM may not be so easy as sales of their legacy generic drugs are likely falling faster than expectations, but the analyst on the street had $148MM in revene for 2010, so just remember who loves you (and I would toot my own here, but that job is being reserved for the lovely Olivia Munn).  Either way, Money McBags' intial analysis holds.  The stock is ridiculously cheap for a drug company, but you have to be a bit wary that they can grow given the decline of their legacy drugs and the yet to be proven future of the drugs they purchased.  The stock could easily double from here since it is trading at less than 1.5x sales, but we're going to sit this one out until we get some more data.

No comments: