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Retailers’ Results Don’t Support “Strong” Government Data

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U.S. consumers pulled out their credit cards and shopped in July, reversing a three-month downward trend in retail sales, according to the Commerce Department. The better-than-expected 0.8 percent rise in retail sales has become another promising piece of government data that some experts are heralding as a sign of an economic recovery.

Liz Dunn, senior retail analyst at Macquarie Capital, says last month's gain in retail sales could be viewed as a positive barometer on the state of the consumer, but she also forecasts a slowdown in consumer spending over the next few months.

Middle-and-low income consumers are spending on essentials but not splurging. High-end customers have cut back their purchases because of uncertainty in the stock market.

Dunn emphasizes that some retailers — such as Michael Kors (KORS) — are performing well but many are not.

In an interview with The Daily Ticker, Dunn argues that unseasonably warm weather in the first quarter boosted sales for retailers, but lowered consumer appetite in the second quarter, resulting in a much weaker quarter. This week Estee Lauder (EL), Saks (SKS) and Michael Kors issued bullish sales forecasts for the rest of the year which Dunn says may be overly optimistic. The third quarter could fall below expectations, she notes.

Wal-Mart (WMT), the largest retailer in the U.S., reported strong international and same-store sales in the last quarter but revenue fell short of Wall Street estimates, a "blah" quarter that "was like the economy itself" notes Yahoo! Finance's Jeff Macke.

Dunn covers a broad array of retailers but recommends just four: Macy's (M), Coach (COH), Fossil (FOSL) and J.C. Penney (JCP).