Fin - Breakout - US

The Best Retail Stocks to Own: Stackow

Jeff Macke

Unemployment is creeping higher, gas is at historic highs and the weather has been terrible in major portions of the country. All of that being the case, the consumer must be doing less shopping, right? No need to guess, Breakout viewers, the first Thursday of every month is when we get to hear about the consumer when retailers report same-store sales.

To help us decipher today's data, Breakout welcomed Walter Stackow, senior retail analyst in the consumer group at Manning & Napier. The trick of looking at retail this time of year is to remember that Easter is the main driver of seasonal sales and the timing of the holiday changes from year to year. The headlines were inflated by a late Easter, so it's important to note that analysts view March and April on a combined basis. Adjusted for all that noise, the results were still encouraging.

This was "the toughest March/ April compare in about seven years" says Stackow, referring to robust sales during perhaps the giddiest portion of the year-long rally from the lows of March '09. "The fact that sales are running stronger than expected is a really good indicator of strength in the consumer at the moment."

When more or less forced to say good things about Nordstrom (JWN), which his host is long, Stackow toed the line nicely, but if you want to get him excited, you turn to the car retailers. Stackow's firm is long Penski (PAG), Group One (GPI) and Sonic (SAH), all publicly traded auto dealers. Given the price of gas and cars, and the rather tenuous grip on national sales growth, auto dealers seem a strange place to invest.

Stackow has an answer for every critical point. He notes that the age of vehicles currently on the road is at an all-time high, there's pent-up demand and sales are upticking nicely. Walter adds that the price of gas rising isn't uniformly negative for car sales; consumers are switching the shift of purchases from heavier to more fuel-efficient cars. The car dealers are cheap, fundamentals seem in place and Stackow is the first person I've heard talking about auto retailers as a place to shop in years. Your mileage and take may vary, but they were all points well made.

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