Transcripts

Retailers Shift Into Rally Mode

SUSIE GHARIB: Shares of amazon.com hit an all-time high today on investor confidence the retailer will be a big winner this holiday. But it was the only big retail winner, as shares of most others sank on soft sales from black Friday. Still, retail stocks overall have been rallying for months. So, will the good cheer continue for the sector? Suzanne Pratt reports.

SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: From Macy's in New York's Herald Square to Old Navy, to JCPenney, retailers are trying to believe in this year's holiday season. For retail stocks, however, the optimism began months ago. Despite sky-high unemployment and nervousness about consumer spending, retail shares have been market leaders this year. The S&P retail index is up 42 percent since January, more than double the S&P 500. Retail analyst Richard Jaffe says investors are trying to get a jump start on the recovery.

RICHARD JAFFE, RETAIL ANALYST, STIFEL NICHOLAUS: I think people look ahead and say the economy will get better and when it does, what industries, what sectors will benefit first? And, it's the consumers stepping up to the retail or apparel retailers to spend.

PRATT: So, is it too late to get a ride on the retail rally? Experts say if you're looking to play the sector, the answer is probably yes. But S&P retail analyst Marie Driscoll says it's definitely a stock picker's universe because consumers are still facing headwinds.

MARIE DRISCOLL, RETAIL ANALYST, STANDARD & POOR'S: The consumer is increasing their savings rate. The consumer is getting their balance sheet in order. So, there's winners and losers. This is not an environment where people are indiscriminately spending like they did 18 months ago.

PRATT: Driscoll's top picks are Wal-Mart, Polo/Ralph Lauren, Coach and TJX -- all because she says they offer value to shoppers. Stifel Nicholaus' Jaffe also likes TJX, as well as Gap, American Eagle and Children's Place. He says his choices could jump as much as 25 percent in the next year and have one thing in common.

JAFFE: A balance between the left brain activities -- the disciplined rational, analytical, approach to operating a retailer -- and then the right brain side, the creative, artistic, risk-taking side of the equation which fills the store with merchandise that inspires the consumer to buy.

PRATT: Forecasts for retail stocks beyond the holiday season get blurrier. Some experts worry the recovery will be muted and that consumers will continue to battle their own financial realities. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.