Prepare for the worst. Hope for the best. That’s the motto of the nation’s retail industry these days.

With consumers stitching their wallets shut and retailers slashing their margins in an attempt to attract the few Americans left that are willing to spend, expectations are not high for stores setting up shop in the nation’s malls.

But with low expectations come big surprises.

With the first batter of the latest earnings season, Alcoa (NYSE:AA), hitting a triple last night, optimism is on the rise. Thanks to some better-than-expected same-store sales figures this morning, the high hopes are raising the mood for the retail industry.

The morning’s leader board is filled with the names of clothing sellers once tossed aside to the ravens of Wall Street.

Tandy Leather Factory (AMEX:TLF) is taking its shareholders on a ride to new yearly highs after it announced a September sales figure significantly larger than expected. Compared to last year’s figures, comparable monthly sales rose by 14%.

The surprising action has sent shares of the leather retailer up by double-digit proportions so far today, adding to the triple-digit gains already created as the stock more than doubled in value from its March lows.

Better than nothing

While the news from Wet Seal (NASDAQ:WTSLA) is not quite as positive, word of better-than-expected shares has created a profit opportunity for its shareholders.

As a player in the women’s specialty market, Wet Seal has plenty of competition as it fights for what’s left of the nation’s discretionary spending. That’s why analysts were expecting a sales decline of 7.8% from last September’s figures.

But now that the company tells us the figure was actually a decline of just 4.5%, investors are wondering if this is a good buying opportunity. With shares up by over 5% on the day, its obvious plenty of investors are increasingly bullish.

Finally, while the 30% surge from Liz Claiborne (NYSE:LIZ) has little to do with past sales figures, it has everything to do with the company’s future sales growth.

Shares of the clothing designer and marketer are surging on the news the company has signed an exclusive deal with J.C. Penney (NYSE:JCP). The word is J.C. Penney will have sole access to the Liz Claiborne and Claiborne brands.

The contract is good news for the cash-strapped firm as it includes guaranteed minimum profit sharing, royalty payments and design service fees.

While I am weary of the long-term sustainability of today’s surge forward, there is no denying the surprisingly good figures are a sign that the devastated retail industry still shows signs of life.

A lot of innings remain to be played in the current earnings season. So far, the bulls are ahead. But the game is far from over.

Source: Retail Industry is Getting Attractive

Anyone can look in my closet and tell that I am not much of a shopper. I generally only replace things when they are beyond repair. As my girlfriend likes to point out, I have a pair of jeans from a store that went out of business years ago. Perhaps it’s my Midwest nature, but if they still fit, I’m wearing them. Holes be damned.

Obviously, this means I don’t set foot in malls very often. Usually it is only to redeem the gift cards I get at Christmas.

So, over the past few weekends, armed with my Christmas bounty, I was off to the mall. I could see it in my mind: empty parking lots, and everything 90% off.

We are in a recession after all. And it was far enough after the holidays that the malls would be deserted. I could park right by the door, get in and out without any long lines and not return for another 11 months.

You know what they say about assumptions.

The place was absolutely packed. The parking lot was nearly full, and while it wasn’t a last weekend before Christmas throng of shoppers, there were a startling amount of people with apparently nothing else to do on a beautiful 70 degree Sunday afternoon in Florida.

But we are in a recession. How can this be? Just window shoppers?

Unfortunately, that is very likely. According to the January Business Wire’s Monthly Retail Report, same store sales still fell 1.6 percent in January, but with a very large asterisk.

That large asterisk being Wal-Mart (WMT).

While Wal-Mart saw same-store sales increase 2.1 percent in January, it’s weighting in the Index (53 percent) heavily skewed the final reading.

Take out Wal-Mart, and the rest of the retail landscape isn’t pretty at all.

• Gap – 23 percent drop
• Saks – 23.7 percent drop
• JC Penney – 16.7 percent drop

Unfortunately for retailers, it doesn’t look like they will be turning the corner anytime soon. Faced with a continued slowdown in the economy and shrinking disposable income, it may take 90 percent off sales to get shoppers in the door.

And that’s the flipside of generating foot traffic with such heavy markdowns. With such heavy markdowns, margins must be razor-thin, or just not there. My guess is to move older inventory to make way for the new spring merchandise, many items are being let go at or below cost. This is going to have a serious impact on first quarter earnings figures.

Go long WMT, short just about everything else in the retail sector. You can see the full monthly retail report here.

Source: Can Wal-Mart Lead Other Retailers Out Of The Muck?