Retail Stocks Are Rebounding —Even Without the Consumer..consider Macy's

The latest batch of monthly retail sales reports drives home the point that consumers are still conserving their cash, but despite weak spending levels, smart retailers are poised for better performance, and investors are taking notice.
The key is retailers were impacted early by the economic downturn and they have been working hard to manage their business.

"The retailers really saw this before everyone," says Scott Billeadeau, of Fifth Third Assets Management. "If you rewind back a year... many of these companies and the management teams have been in cost cutting and cost management (mode), and (have been) redefining the business models for a quite a while now, and I think that is one of the encouraging things because now when we do get some incremental top-line sales, I think there's going to be some dramatic earnings leverage in some of these companies."


Also, advances in technology have retailers keeping tight controls on inventory, allowing retailers to be more profitable even with small sales gains.

"The stock market clearly believes the consumer is on the way back,” Johnson said, “but like second marriages—and bear trap rallies—this may represent the triumph of hope over experience. Certainly, astute retailers can restore profitability by resizing their business to reflect lower demand levels, but rebuilding topline growth in this economy remains a major challenge