More Retail Carnage (NKE, BBBY, ANF, ANN, JCG, JOSB)

I've been watching the retail sector closely today following lackluster earnings reports from Nike NKE and Bed, Bath & Beyond BBBY. Not surprisingly, many retailers are not faring well. Abercrombie & Fitch ANF is down $1.10, or 3.37%, to $31.55. AnnTaylor ANN is down $1.06, or 5.76%, to $17.33. J. Crew JCG is down $1.71, or 4.25%, to $38.55. Joseph A. Bank JOSB is down $1.97, or 3.44%, to $55.38. We all know the headwinds facing the consumer: a stagnant labor market, housing in the dumps, unemployment compensation running out, continued deleveraging, etc., etc. About the only relief consumers are getting nowadays is relief at the pump. Many of the retailers listed above are down some 25-30% from their April highs. They are not expensive based on P/E or Price/Sales ratios. However, the concern going forward is where will the growth (if any) come from? Retailers showed remarkable resilience during the recession by operating on lean inventories and managing costs well. But, those are not long-term survival plans. To be fair, the best time to buy is when everyone (the consensus) agrees that a particular outcome will happen. With everyone so bearish on retail and the consumer in general, now may be the time to play contrarian. And while unemployment may be a real problem, it is showing improvement, albeit very slowly. Handle retail with care!