If you need sure-bet plays in retail, you have to stick with Wal-Mart Stores, Inc. (NYSE/WMT) and Costco Wholesale Corporation (NASDAQ/COST).
Costco delivered with strong results on Wednesday, after posting earnings of 312 million dollars, or $0.71 per diluted share, above the consensus estimate of $0.69 per diluted share, according to Thomson Reuters. Revenue growth was 11% to $19.24 billion, above the consensus estimate of $18.81 billion. The results are consistent and continue to show steady growth, but, for extra growth, you need to look at the smaller companies.
Costco, for instance, has a market cap of $29.88 billion and is estimated to report sales growth of 8.1% and 7.7% for the fY11 and FY12, respectively.
Yet, take a look at small-cap PriceSmart, Inc. (NASDAQ/PSMT), an operator of warehouse clubs in Central America and the Caribbean. PriceSmart reported a booming 15.8% increase in its November same-store sales and a 21% year-over-year rise in November sales. These are strong metrics, and consider the comparative sales growth for PriceSmart, which is 14.8% and 11.8%, for the FY11 and FY12, respectively,
Retail is on the mend. Consumers are buying again. According to Retail Metrics, sales data from the 30 retail chains followed grew 5.8% in November, representing the 14th straight increase and well above the estimate of 3.5%.
Black Friday and Cyber Monday were outstanding.
What has been impressive has been the demand for luxury goods, including strong results from Tiffany & Co. (NYSE/TIF) and higher demand for expensive vehicles.
The key, as I have said, is for a strong holiday sales season that could drive a Santa Claus Rally extending into the New Year. Sales heading into the holiday season also look encouraging given the stronger-than-expected Consumer Confidence Index for November. The confidence reading is critical, as it suggests that consumers are positive.
It does appear a reversal may have occurred in retailing. The key is to look for same-store sales growth in retailers that sell non-essential goods. Increases here could mean consumers are spending on goods and services that are non-essential. These include electronics, appliances, furniture, autos, and other big-ticket items.
My favorite in the retail space continues to be the discounters and big-box stores. The big-box stores are now selling a broad range of electronics and are adding to their product line. This will offer consumers a one-stop place for shopping.