Brian Sozzi Discusses April Retail Sales (AEO, WMT, TGT, ANF)

Brian Sozzi from Wall Street Strategies is out with a research note on April retail sales, which were released this morning. In the report, Sozzi mentions names such as American Eagle AEO, Target TGT, and Wal-Mart WMT, and Abercrombie & Fitch ANF. In the note Sozzi writes, "I think the April retail sales report showcases the stress on the average U.S. household from mounting cost of living increases, and therefore stock selectivity where companies have outsized consumer exposure remains key to success." Sozzi goes on to say how gas prices are affecting sales, as discretionary retail spending is beginning to see some weakness. In the note, Sozzi writes, "Gas prices entered 2011 on a fairly benign glide path, providing fuel to the consumer psyche which was continuing to improve amid a new pay raise, a new job, and of course the return of the wealth effect compliments of the Fed. Retail sales in very discretionary categories, say sporting goods, health and personal care, furniture, and electronics have started to transition from solid recovery in 2010 to mixed or weakening trends. The lag effect is obvious when drilling into the data. To me, the retail sales reads YTD depict a consumer that is cognizant of the factors nipping away at wages and the payroll tax credit funds, as well as being mindful of the downside of spending with reckless abandon circa 2007." Sozzi does give some perspective on where money might be flowing. He says that money will most likely flow to best in class (Abercrombie jeans over American Eagle), or the lowest price possible (dollar stores). "Dollars tend to be allocated to brands that offer best in class value equations (say an Abercrombie pair of jeans instead of an American Eagle pair of jeans) or the lowest possible price (dollar stores as opposed to Wal-Mart/Target)," Sozzi wrote.