Find Blue-Light Specials In Retail ETFs [The Gap Inc., Family Dollar Stores, Inc., Wal-Mart Stores, Inc.]

retail etfTony Sagami:  The cold winter of 2014 was the popular Wall Street excuse for the disappointing first quarter profits and justification for the 2.9% contraction drop in GDP.

Now, in the middle of the Q2 reporting period, I’m hearing the same “dog ate my homework” excuse from companies that deliver worse-than-expected profits … especially for retailers.

The Census Bureau reported last week that U.S. retail sales increased by 0.2% in June. This was well below the 0.6% gain economists were expecting.

The worst-hit sectors were building materials, restaurants, auto dealers and gas stations.

But I think the most-accurate hints about the state of the economic recovery (or lack thereof) came straight from the mouths of the retailers themselves.

Here’s what they had to say:

The Gap (NYSE:GPS) reported weaker-than-expected sales, complaining that same-store sales dropped by 2% in June.

Family Dollar (NYSE:FDO) saw its quarterly profits fall by one-third on a 1.8% decline in same-store sales. That was, by the way, the third quarter in a row that same-store sales have shrunk.

Family Dollar told Wall Street to lower its too-high expectations: “Our results continue to reflect the economic challenges facing our core customer and an intense competitive environment.”

The Container Store (NYSE:TCS) reported a 0.8% drop in same-store sales; the first drop after 15 consecutive quarters of gains.

CEO William Tindell warned that low-, middle- and high-income consumers are tight-fisted nationwide.

A ‘Democratic’ Decline

“We don’t see any geographical differences between it. It seems to be all over the place, and we have a robust database,” Tindell told analysts this week.

“Our highest-end customer seems to be infrequently shopping us for some darn reason. Still, we have a very uneven economic recovery. For a long time, it was the lower-end retailers suffering and the higher end that was doing better, and so were we.

“Now, it seems to be more democratic. It seems to be kind of across the board,” Tindell added.

Perhaps the most-telling comments came from Wal-Mart (NYSE:WMT) CEO Bill Simon, who said American shoppers just aren’t spending.

“It’s really hard to see in our business today whether it’s any better.”

“The hiring rebound reported by the U.S. Labor Department is not translating into increased customer spending in Wal-Mart stores.”

“Wal-Mart customers are adapting to what has been a difficult macroeconomic situation.”

Of course, there are pockets of retail strength, but with consumer spending so weak, it is not about to rebound anytime soon.

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