Retail Industry Groups Showing Strength

Source: ~ Author: Vincent Mao

After lagging earlier in the year, some retail groups are now hanging tough amid a volatile market.

dollar treeIn Thursday’s IBD, five groups from the retail space were ranked in the top 40 of the 197 industry groups. That’s up from three at the start of the month. While retail stocks have underperformed the market for most of the year, they started to show relative strength in late July.

The Retail-Discount & Variety group ranked No. 8 Thursday, up from No. 13 three weeks prior. The group is rising amid consolidation among dollar stores. In late July, Family Dollar (NYSE:FDO) agreed to merge with Dollar Tree (NASDAQ:DLTR). But Dollar General (NYSE:DG) has tried unsuccessfully to step in and buy Family Dollar. Dollar General has offered a higher bid for Family Dollar.

Five Below (NASDAQ:FIVE), which has the highest Composite Rating in the discount group, is trying to bounce higher this week after falling for four weeks straight. The stock recently entered Sector Leaders, which is IBD’s most demanding stock screen.

The Retail-Restaurants group jumped to No. 15 in Thursday’s edition, up from No. 42 three weeks ago. A number of leading restaurant stocks are covered in the Stock Spotlight column, today on B5.

Chipotle Mexican Grill (NYSE:CMG), one of the highest-rated stocks in the restaurants group, will report second-quarter results Monday.

The Retail-Apparel/Shoes/Accessories group moved up to No. 18 from No. 28. Land’s End (NASDAQ:LE) is staging an upside reversal at its 10-week moving average. The stock is in its first test of the line since breaking out in September. The company was spun off from Sears Holdings (NASDAQ:SHLD) in April.

Burlington Stores (NYSE:BURL) is also in a test of its 10-week line. The stock had a failed breakout from a cup within a larger consolidation in late June, but staged a sharp comeback after that.

Some stocks of mini-markets and supermarkets have rallied amid market weakness.

Pantry (NASDAQ:PTRY) climbed to its best levels in about four years this week after bouncing off its 10-week moving average. It has shown solid accumulation in recent months.

Casey’s General Stores (NASDAQ:CASY) scored a record high early in the week. The stock cleared a 77.68 buy point from a long consolidation Monday in heavy trading.

The Retail-Super/Mini Markets group bolted to No. 32 from No. 68 three weeks before that.

On Wednesday, retailers were dealt some bad news. Retail sales fell by 0.3% in September, according to the Commerce Department. That was the first drop since January. Electronics was a rare bright spot. Strong demand for Apple’s (NASDAQ:AAPL) latest iPhones helped electronic sales to grow 3.4%.

Citing a “tougher sales environment,” Wal-Mart (NYSE:WMT), the world’s largest retailer, trimmed its sales growth forecast to 2% to 3% from about 3% to 5%. Consumer spending is important, as it accounts for two-thirds of economic activity.

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