Because September 2004, the S&P Retail Index has been caught in a sideways consolidation channel at between 400 and 500, unable to establish a sustainable trend in a single direction or the other. Throughout that time, the monthly retail numbers happen to be largely mixed. But in January, the retail data (excluding auto) was impressive, showing growth of 2.20% versus the estimate of 0.8%. It was the strongest reading in many years.

Yet the initial optimism appears being fading after seeing mixed reports from the nation’s retailers on Thursday. The early data suggests that same-store sales growth will be sub par compared to what we saw in January.

The reading in January may possibly have been an aberration because of warmer than expected temperatures. The surfacing of cold weather in February apparently sent a chill through the pocketbooks of consumers. Also, the strong January sales may possibly have taken away from spending in February.

The reality is the absence of a positive trend in retail makes spending in retail stocks and shares a lot more of your danger. You need to pick the proper organization. Even bellwether stocks for example Wal-Mart Stores  (WMT) are struggling as far as its share price tag in spite of some decent sales outcomes and same-store sales growth. But the current valuation deserves a appear.

Youth oriented clothes retailer Gap (GPS) is a organization that is clearly struggling at the cash register. Its February same-store sales crashed 11% year-over-year, nicely above the Street estimate calling to get a decline of 6.80%. This followed on the heels of an 11% decline inside the company’s Q4 earnings along having a FY07 forecast that was short of Wall Street expectations.

GAP expects comparable-store sales to become negative in the initial half and turn moderately positive for the remainder with the year. Same-store sales are widely viewed as the finest indicator of your retailer’s health.

For investors, GAP is clearly a turnaround play that could spend off if it can somehow figure out how you can attract shoppers. The fact may be the business has excellent brand awareness and this counts for some thing in this brand conscious planet we live in.

On the upside, you might have a business like Finest Acquire (BBY), a dominant industry leader in consumer electronics. The investment is just below its 52-week substantial, up 69% from its yearly reduced.

The reality is retail spending might be impacted by the greater financing costs associated with the rising debt loads across America. The personal savings fee is declining and was negative in January. Consumers are eating into their savings and you realize this cannot be great for retail. 

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