Earnings growth for the reporting retailers is up too, by 11.8%. Excluding Wal-Mart Stores Inc. (NYSE: WMT) due to its size, Retail Metrics reckons that its 120 retailers will show profit growth of 12.2% in the first quarter. Including Walmart, profits will rise 13.8%.

The best profit growth is expected in the recreational sector, with Dick’s Sporting Goods Inc. (NYSE: DKS) and Hibbett Sports Inc. (NASDAQ: HIBB) leading the way a 40%+ earnings gain. Home furnishing retailers are expected to post 40% gains, led by Bed Bath & Beyond Inc. (NASDAQ: BBBY) and Williams-Sonoma Inc. (NYSE: WSM). Footwear retailers are tabbed to grow profits 31%, following huge gains at Brown Shoe Co. (NYSE: BWS) and Footlocker Inc. (NYSE: FL).

The worst performing sector is projected to be consumer electronics, with teen apparel stores the only other retailing sector expected to post overall losses. Best Buy Co. Inc. (NYSE: BBY) and GameStop Corp. (NYSE: GME) are the big players here. Teen apparel retailers like Wet Seal Inc. (NASDAQ: WTSLA), Gap Inc. (NYSE: GPS), and Abercrombie & Fitch Co. (NYSE: ANF) have struggled with same-store sales and revenues, as well as earnings.

Paul Ausick

The unofficial closing bells put the DJIA down 74 points to 12,368.47 (-0.59%), the NASDAQ fell nearly 35 points (-1.24%) to 2,778.79, and the S&P 500 fell -0.74% or nearly 10 points to 1,295.17.

There were several analyst upgrades and downgrades today, including LinkedIn Corp. (NYSE: LNKD) reiterated as ‘buy’ with a target price of $135 at Canaccord Genuity; Dendreon Inc. (NASDAQ: DNDN) started as ‘sell’ at Maxim; Bank of Ireland (NYSE: IRE) cut to ‘sell’ at Deutsche Bank; Phillips 66 (NYSE: PSX) started as ‘buy’ at UBS; and Sprint Nextel Corp. (NYSE: S) raised to ‘buy’ at Guggenheim.

Earnings reports since markets closed last night have led to some price changes as of the last half hour of trading today: ANN Inc. (NYSE: ANN) is up 3.25% at $26.69; Brown Shoe Co. Inc. (NYSE: BWS) is up 21.4% at $10.63 (more coverage here); Progressive Corp. (NYSE: PGR) is down -0.1% at $21.32; and Footlocker Inc. (NYSE: FL) is up 8.9% at $30.50.

Next week we are scheduled to get earnings reports fromTech Data Corporation (NASDAQ: TECD); Urban Outfitters Inc. (NASDAQ: URBN); Autozone Inc. (NYSE: AZO); Best Buy Co. Inc. (NYSE: BBY); Dell Inc. (NASDAQ: DELL); PetSmart Inc. (NASDAQ: PETM); Ralph Lauren Corporation (NYSE: RL); Big Lots Inc. (NYSE: BIG); and Hewlett-Packard Co. (NYSE: HPQ) among others.

Other standouts from today include the following stocks:

Renren Inc. (NYSE: RENN) is down -20% at $4.99. The Chinese Internet company is getting whacked on Facebook’s IPO. More coverage here.

GSV Capital Corp. (NASDAQ: GSVC) is down -18.6% at $13.10. The investment company had a nice hunk of Facebook shares at a very low price — all the value is in today. More coverage here.

Zynga Inc. (NASDAQ: ZNGA) is down -16.3% at $6.92 after posting a 52-week low of $6.90 earlier today. Another stock that climbed on Facebook’s back during the run-up to the IPO, shares were stopped by an automatic trigger shortly after FB shares opened today. More coverage here.

Stay tuned for Monday. Atlanta President Dennis Lockhart is giving a speech. We have also noted the following events on the schedule (all times Eastern):

• 10:00 a.m. – Existing home sales
• 10:00 a.m. – Richmond Fed manufacturing index
• 11:30 a.m. – 3- and 6-month bill auctions

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Have a great weekend!

Paul Ausick

Brown Shoe posted adjusted EPS of $0.23 versus a consensus estimate of $0.09. Revenue totaled $626.4 million compared with an estimate of $600.7 million. The company also guided full-year EPS to $0.83-$0.95, while the consensus estimate had been $0.86. Revenue guidance of $2.57-$2.59 billion was also higher than the $2.55 billion estimate.

Footlocker posted EPS of $0.83 versus a consensus estimate of $0.74. Revenue totaled $1.58 billion compared with an estimate of $1.55 billion. The company did not provide guidance in its press release, but the consensus estimate for the current quarter calls for EPS of $0.31 on revenue of $1.34 billion. For the full year, Footlocker is expected to show EPS of $2.28 on revenue of $6.01 billion.

Shares of Footlocker are up 9.8% at $30.76 in a 52-week range of $16.66-32.27. Brown Shoe is up more than 15% at $10.09 in a 52-week range of $5.85-$11.42.

Paul Ausick

The unofficial closing bells put the DJIA down 156 points to 12,442.49 (-1.24%), the NASDAQ fell more than 60 points (-2.10%) to 2,813.69, and the S&P 500 fell -1.50% or nearly 20 points to 1,304,87.

There were several analyst upgrades and downgrades today, including Dell Inc. (NASDAQ: DELL) raised to ‘neutral’ at Sterne Agee; IntercontinentalExchange Inc. (NYSE: ICE) raised to ‘strong buy’ at Raymond James; SINA Corp. (NASDAQ: SINA) raised to ‘overweight’ at Barclays; Visa Inc. (NYSE: V) reiterated as ‘buy’ but removed from Conviction Buy List at Goldman Sachs; Deere & Co. (NYSE: DE) reiterated as ‘buy’ with target price of $96 at Argus.

Earnings reports since markets closed last night have led to some price changes as of the last half hour of trading today: Bon-Ton Stores Inc. (NASDAQ: BONT) is down -7.3% at $4.09; Dollar Tree Inc. (NASDAQ: DLTR) is down -5.6% at $95.60; E-Commerce China Dangdang Inc. (NYSE: DANG) is down -16.6% at $6.25 (more coverage here); GameStop Corp. (NYSE: GME) is down -10.1% at $18.72 (more coverage here); Sears Holdings Corp. (NASDAQ: SHLD) is up 3.9% at $52.84; and Wal-Mart Stores Inc. (NYSE: WMT) is up 4.7% at $61.97 (more coverage here).

On Friday we are scheduled to get earnings from ANN Inc. (NYSE: ANN), Brown Shoe Co. Inc. (NYSE: BWS), JA Solar Holdings Co. Ltd. (NASDAQ: JASO), Progressive Corp. (NYSE: PGR), and Footlocker Inc. (NYSE: FL).

Other standouts from today include the following stocks:

Rosetta Genomics Ltd. (NASDAQ: ROSG) is down -17.7% at $4.11. The medical diagnostics firm priced a secondary offering this morning. More coverage here.

Dendreon Inc. (NASDAQ: DNDN) is down -11.3% at $7.65. The company’s prostate cancer drug got another challenge from a competing product from Johnson & Johnson (NYSE: JNJ). More coverage here.

MEMC Electronic Materials Inc. (NYSE: WFR) is down -21.4% at $1.68 after posting a new 52-week low of $1.63. The solar component maker lost its CFO today. More coverage here.

Stay tuned for Friday. We don’t have anything on the schedule for tomorrow, but that doesn’t mean that we’ll have a quiet day.

Paul Ausick

For Under Armour, the pick is Visible outlet square footage growth, as well as new line extensions, and even its move away from sweat repellent form-fitting materials into the cotton-based market.  The firm expects over 25% top-line growth as a result.

For Foot Locker, the firm does not expect a deceleration in the athletic footwear cycle that has been driving solid comp growth in running and basketball.  The firm is also looking at the company’s opportunity to improve its margin structure through changes to its apparel business that are less top-line dependent.

Both companies have some overlaps in the customer bases.  Canaccord Genuity sees several trends to watch during 2012: 

• The firm expects broader price increases during 2012 as many companies are planning to pass on higher costs with some seeing no pushback and others being forced to mark down price.
• The athletic cycle is expected to continue in 2012 with footwear trends in running and in basketball.  The new lightweight shoes for running, based on past new product cycles, could persist for three to five years and the current cycle is robust.  This is also believed to be a secular trend towards a more active and athletic lifestyle.
• Tier 1 brands should dominate with brands having better pricing power than Tier-2 and Tier-3 retail stories.

What is interesting is that the report starts out, “Heading into 2012, we are not assuming a significant improvement to the consumer spending environment, which will likely continue to be pressured by high unemployment and low wage growth. In addition, price increases from both apparel and footwear manufacturers will begin to flow through…”

As far as the targets…. The most recent Under Armour price target is $102.00 versus a Thomson Reuters consensus price target objective of $82.00 and versus a $73.00 price target today. Canaccord Genuity is the ‘Street High’ price target objective in Under Armour.  The most recent Foot Locker price target is $30.00 versus a Thomson Reuters consensus price target objective of $27.00 and versus a $23.67 price target today.  The ‘Street High’ price target is $34.00.

JON C. OGG

Skip to the eight worst-performing retail chains in America

Analysts predict that the holiday shopping season will be difficult for many retailers this year. The National Retail Federation reported that industry sales will be up only 2.8% to $465.6 billion, not enough to make up for three brutal years. Thousands of stores have been closed as a consequence of a drop in retail activity because of the recession. Stores closures for many retailers will continue.

Several of the largest retailers have consistently performed poorly between 2005 and 2010 for reasons that go beyond the recession. 24/7 Wall St. has identified the eight retailers that lost the most in total sales during that period. The stores that fared the worst have a great deal in common.

First, some specialty retailers compete with larger chains. This is certainly the case for Foot Locker because the big box retailers and most department stores sell high-end athletic shoes.

The presence of direct competitors that are similarly sized is yet another reason for the poor performance of some stores on the list. The office products retail sector is occupied by Office Depot, Office Max and Staples. Walmart’s Sam’s Club has created lines of merchandise that also compete in the same market.

The third reason that some of the retailers have done poorly is weak management. Robert Nardelli was a former Jack Welch lieutenant at GE. Nardelli was passed over for Welch’s job. He was hired by Home Depot to run the company after he failed to get the promotion. Between 2000 and 2007, Nardelli managed to alienate both employees and shareholders with poor results and his extravagant pay packages. JCPenney has had similar management problems. Poor merchandising decisions by CEO Mike Ullman, who has run the company since 2004, hurt revenue. He was recently replaced by the head of Apple’s retail store operation, Ron Johnson.

The retail industry has fared relatively well in the past five years, despite the recession, buoyed by strong sales during 2005 to 2007. GDP grew by 16% over these same five years. Also, most big operators have been able to increase revenue since the middle of the last decade. U.S. Sales at industry giants such as Walmart, Target and Costco have risen by 21%, 13% and 28%, respectively. With $600 billion a year in combined sales, the trio are a reasonable proxy for the entire industry.

To identify the large retailers in America with the worst sales, 24/7 Wall St. reviewed data published by National Retail Federation’s Stores Magazine. We relied on “Top 100 Retailers” list to identify the retailers that had lost the most in annual retail sales from 2005 to 2010. Only public companies were ranked in order to demonstrate how declining sales affect the overall health of corporations. Because sales numbers can be distorted, companies with significant M&A activity were also excluded.

These are America’s eight disappearing store chains.

Our current screen yielded nine retailers in different retail segments.  Apparel, discount stores, groceries, home improvement:  they are all there.  We list the companies in order of the size of the dividend yield in descending order: The Home Depot, Inc. (NYSE: HD); Foot Locker, Inc. (NYSE: FL); Wal-Mart Stores Inc. (NYSE: WMT); Staples, Inc.  (NASDAQ: SPLS); Target Corp. (NYSE: TGT); Safeway Inc. (NYSE: SWY); Gap Inc. (NYSE: GPS); Lowe’s Companies Inc. (NYSE: LOW); Nordstrom Inc. (NYSE: JWN).     Lastly, there is the Retail HOLDRs (NYSE: RTH) and the SPDR S&P Retail (NYSE: XRT) for investors consider.

The nine companies pay dividends ranging from 2.1% to 2.9%.  Beyond attractive dividends,  these companies boast additional positive characteristics including: EPS growth this year exceeding 12%; forward PE’s lower than 13; price to free cash flow (P/FCF) per share lower than 28.50; returns on Equity (ROE) greater than 10%.  All boast good liquidity with an average daily trading volume exceeding 2 million shares. As you can see, something for value investors, income investors, and others.

Except where otherwise noted, the source for all performance and financial data is Finviz.com. There is one other thing for income and retail-sector investors to remember.  Some of these have much more implied upside to what Wall Street is targeting.  We evaluated the implied upside to Thomson Reuters analyst targets so that we could weed out those companies trading above their implied value.

The Home Depot, Inc. (NYSE: HD) pays a 2.9% dividend with an earnings-to-dividend payout ratio 45.7%. Home Depot’s  shares closed at $34.53 Friday. Its 52-week price range is $25.82 to $38.82.  Home Depot has an implied upside of about 19% to its consensus Thomson Reuters analyst price target of $41.04. The most recent upgrades in both Lowe’s and Home Depot got it names as one of the “Top 10 Analyst Calls of the Week” this last weekend as well.

Foot Locker, Inc. (NYSE: FL) pays nearly 2.9% in dividends with a payout ratio of 46.6%.
The company’s forward PE is a modest 12.8, but is among the highest among this group of retailers.  At 10.2%, its return on equity (ROE) is among the lowest on this list.  Foot Locker’s  shares closed at $22.82 Friday.  Its 52-week price range is $11.30 to 25.50. Foot Locker, Inc. has an implied 22% to its consensus Thomson Reuters analyst price target of $27.82.

Wal-Mart Stores Inc. (NYSE: WMT) pays almost 2.8% in dividends with a payout ratio of 29.2%.   Wal-Mart’s  shares closed at $52.82 Friday. Its 52-week price range is $46.59 to 57.12.

Wal-Mart Stores Inc. has an implied upside of about 15.5% to its consensus Thomson Reuters analyst price target of $61.00.  For whatever it is worth, that $61.00 price has only been hit once in the last 5-year period.  Wal-Mart is also in that buyout plan which we have argued could even be large enough to eventually almost take itself private if maintained year in and year out.

Staples, Inc.  (NASDAQ: SPLS) pays a 2.6% dividend with an earnings-to-dividend payout ratio 29.7%.  The share price of Staples closed at $15.35 Friday. Its 52-week price range is $14.75 to 23.63. Staples has an implied upside of about 28% to its consensus Thomson Reuters analyst price target of $19.71.

Target Corp. (NYSE: TGT) pays almost 2.6% in dividends with an earnings-to-dividend payout ratio of 24%.  Target’s  shares closed at $46.53 Friday. Its 52-week price range is $46.15  to  60.40. Target Corp. has an implied upside of about 28% to its consensus Thomson Reuters analyst price target of $46.99.

Brocade Communications Systems, Inc. (NASDAQ: BRCD) is trading more like Broke-Cade at the Arcade after earnings.  While we expected weak earnings, this is still one of our few stocks which can double over the next couple of years.  Shares closed down 3% at $5.87 today, and then the stock is down almost 9% at $5.35 on over 2.5 million shares since the closing bell. Keep in mind this is averaging about 24 million shares a day now.

Celldex Therapeutics, Inc. (NASDAQ: CLDX) had a bad day with a 14% drop to $7.68, but in the after-hours session the stock is down another 19% at $6.20 on another 68,000 shares since the closing bell.  Someone yelled out “Sell-Dex!” it seems.

Dell Inc. (NASDAQ: DELL) is off the earlier lows after earnings failed to impress.  We have seen 3,270,435 shares trade since the close and shares are down 3.8% at $13.77 after the stock closed lower at $14.32 today.

Foot Locker, Inc. (NYSE: FL) is trading higher with a 74% profit gain and after beating earnings expectations.  Shares were up over 6% in the after-hours session but shares are now up 4.17% at $14.00.

Hot Topic, Inc. (NASDAQ: HOTT) closed down  almost 10% in regular trading after posting a loss.  But shares have slid further by 9.8% at $5.30 on 63,000 shares since the closing bell.

Marvell Technology Group Ltd. (NASDAQ: MRVL) is trading higher after earnings showed it moved from a loss to a $206 million profit above estimates.

Nordson Corporation (NASDAQ: NDSN) beat earnings as sales rose 33% and the stock is up 5% at $66.00 on only 7600 shares.

Salesforce.com Inc. (NYSE: CRM) is down and it may finally have to start worrying about that incredibly high P/E ratio.  Shares closed down 3% at $79.03 and shares are down another 6.2% at $74.10 in the after-hours session.  While sales rose 24%, its net income after items was down and its guidance was short of some expectations.

Red Robin Gourmet Burgers, Inc. (NASDAQ: RRGB) beat first quarter results, but its lower guidance left holders feeling like they own stock in a buger joint called Dead Robin.   Shares closed down 6.3% at $23.56 in normal trading, and Dead Robin is down another 11.3% in the after-hours session at $20.90 on 33,000 shares since the closing bell.

You can join our free daily email distribution list to hear more about dividend trends, analyst upgrades and downgrades, top day trader and active trader alerts, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

Aixtron Aktiengesellschaft (NASDAQ: AIXG) Started as Buy at UBS.
BlackRock, Inc. (NYSE: BLK) Cut to Sell at Citigroup.
CNOOC Ltd. (NYSE: CEO) Cut to Neutral at HSBC.
Devon Energy Corporation (NYSE: DVN) Raised to Outperform at Scotia.
Foot Locker (NYSE: FL) Raised to Outperform at FBR.
Gap Inc. (NYSE: GPS) Started as Buy at SunTrust Robinson Humphrey.
Human Genome Sciences (NASDAQ: HGSI) Started as Buy at Jesup & Lamont.
J. Crew Group (NYSE: JCG) Raised to Outperform at KBW.
Marathon Oil Corporation (NYSE: MRO) Cut to Sector Perform at Scotia.
Research-in-Motion Ltd. (NASDAQ: RIMM) Cut to Sell at Goldman Sachs.

You can join our free daily email distribution list to hear more about dividend trends, analyst upgrades and downgrades, top day trader and active trader alerts, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

We have compiled data and analysis here using Thomson Reuters consensus estimates, recent metrics offered by the companies, relative performance, and more.  As with what we have seen at most retail and apparel earnings this week and last, many of these are richly valued and probably cannot just hope to please the bulls by meeting estimates on cost cutting and inventory management and then giving cautious guidance.

Dick’s Sporting Goods Inc. (NYSE: DKS) estimates are $0.09 EPS and $961.5 million, both higher than last week’s estimates; estimates for the holiday quarter are $0.57 EPS and $1.27 billion in revenues, both also higher than last week.  With shares at $24.60, its 52-week trading range is $9.21 to $26.00.  A look at forward annual earnings estimates of $1.13 EPS for Jan-2010 and $1.29 for Jan-2011 will bring up some of the same valuation concerns we have seen elsewhere in retail.

Foot Locker Inc. (NYSE: FL) estimates are $0.13 EPS on $1.19 billion in revenues.  For the holiday quarter ahead estimates are $0.28 EPS and $1.29 billion in revenues.  The stock is probably not overly expensive at $11 at almost 18-times the $0.60 EPS target for FY Jan-2010 and 14.5-times the $0.73 EPS target for FY Jan-2011.  They are not exactly cheap either.  The 52-week trading range is $3.65 to $12.95.

Gap Inc. (NYSE: GPS) is in a totally new light as the new CEO has really gotten this longstanding turnaround candidate turned around and heading in the right direction.  Things are good enough and not-bad enough that we aren’t calling Old Navy a dead brand thanks to the new efforts.  Estimates are $0.44 EPS and $3.57 billion in revenues.  Next quarter estimates are $0.43 EPS and $4.15 billion in revenues.  The CEO deserves praise, but the question here is one of how to value Gap shares in looking ahead now that it is mature, has managed to get much of a turnaround under its belt considering the economy and peers, and since it is no longer the great growth story it once was.  Estimates are $1.50 EPS for FY Jan-2010 and $1.65 EPS for FY Jan-2011.  With a $22.20 price, Gap trades at 14.8-times this year’s earnings and trades at 13.5-times next year’s expected earnings.  That is not expensive in the current climate, particularly when you consider that it has provided an upside surprise for the last four quarters.  We don’t expect it to come any time soon, but we have always had Gap as a break-up candidate where it could break the three major brands apart.  The company also noted how October same-store sales were up 4% and the total sales rose 5% after seeing gains over at Banana Republic and Old Navy.  The Gap brand continues to drag the ship now.

Ross Stores, Inc. (NASDAQ: ROST) $0.84 EPS and $1.73 billion in revenues.  For the holiday quarter those estimates are $0.99 EPS and $1.92 billion in revenues.  With shares at $45.65 and with a 52-week trading range of $21.70 to $50.50, this doesn’t sound that expensive or like it has to blow numbers away to keep the bulls happy.  The off-price and home accessories retailer trades at 13.5-times expected Jan-2010 earnings estimates of $3.37 EPS and 12.5-times the expected Jan-2011 earnings estimates of $3.67 EPS.

The Buckle (NYSE: BKE) estimates are $0.70 EPS and $231.07 million in revenues; and estimates are $0.81 EPS and $269.94 million in revenues.  At $28.96, the retailer of casual apparel, footwear, and accessories for young men and women has a 52-week range of $13.57 to $39.09 and it trades at 11-times both the Jan-2010 estimates of $2.62 and Jan-2011 estimates of $2.63.  That sounds cheap, but the lack of growth is probably part of the reason when you consider about 6% top-line revenue growth from fiscal years Jan-2010 to Jan-2011.

Sears Holdings Corporation (NASDAQ: SHLD) estimates are -$1.09 EPS on $9.92 billion in revenues.  For the ever-important holiday quarter the estimates are $2.64 EPS and $12.61 billion in revenues.  This has a huge premium close to 70-times this year’s expected earnings and about 50-times FY Jan-2011 estimates.  The premium is due to the old belief of the value of the dirt underneath the shops and because of brands and trademarks which can be sold or licensed.  At $76.00, the 52-week trading range is $26.80 to $79.35.  Calling the history here spotty is an understatement, yet shares continue to rally after selling off on bad news.

The Children’s Place Retail Stores, Inc. (NASDAQ: PLCE) still has a discrepancy from source to source on its earnings estimates so that is about all we will add: $1.38 EPS on $461.18 million in revenues; next quarter estimates are $1.05 EPS on $463.78 million in revenues. The largest unquantifiable risk here is what happens in flu season and how protective Mommy is over Junior. With shares around $34.65, and the 52-week trading range is $16.45 to $37.68.

Wet Seal Inc. (NASDAQ: WTSLA) is a young women’s apparel retailer.  Normally, we might not cover this one, but it is a retailer that has been very range-bound because of a turnaround and because of its mixed performance metrics.  Estimates are $0.03 EPS and $139.79 million in revenues for the past quarter, yet the coming holiday quarter-end estimates are $0.08 EPS and $155.19 million in revenues, yet the company gave guidance of $0.04.  We will hold off on forward valuation multiples because each penny in an EPS scenario for a $3.36 stock will skew the ratios.  October same-store sales were down 1.3%.

Williams-Sonoma Inc. (NYSE: WSM) is not just in the apparel market, but steadfast in the retail market for middle and upper-middle class spending for the kitchen and house. Its estimates are $0.05 EPS and $686.1 million in revenues. For the important Christmas quarter the estimates are much higher at $0.38 EPS and $949.9 million in revenues.  At $20.66 and with a $4.35 to $22.25 52-week trading range, this company absolutely has to knock the cover off the ball here.  Otherwise, this trades at 62-times Jan-2010 fiscal estimates and 38-times Jan-2011 fiscal earnings estimates.  Meeting estimates and maintaining guidance won’t likely be enough here.

Zumiez, Inc. (NASDAQ: ZUMZ) is the last of the retailers out on Thursday Estimates for the action sports equipment and apparel retailer are $0.15 EPS and $112.01 million in revenues for the last quarter, which is higher than estimates last week.  For the important holiday quarter-end ahead the estimates are $0.25 EPS and $131.17 million in revenues, also higher than last week. Unfortunately, its same store sales in October were off by -8.9% and that may erase its habit of beating estimates.

JON C. OGG
NOVEMBER 17, 2009