This from Katharine Schildt of Investment U:

A new trend has emerged due to the current recession: frugality.

With jobs being lost every day, tighter credit and a weak housing market, consumers are pinching pennies in every way they can.

But for one store in particular, this hasn’t had the negative impact that most expected.

Children’s Place Retail Stores Inc. (Nasdaq: PLCE), a leading children’s clothing retailer, announced yesterday that its same-store sales for the month of February were flat.

Flat sales, doesn’t seem like something that we should be rejoicing over. But this beat Wall Street’s expectations of a 3.6% decline.

The important thing to remember here is that same-store sales are the best metric for measuring retail performance. So the fact that it managed to remain flat, rather than decline, points to good things in its future.

While most U.S. retailers saw lackluster same-store sales last month, The Children’s Place remained on top.

Aside from strong same-store sales, PLCE had net sales of $110.4 million for the four-week period ended February 28 – only a 1% decrease compared to the same four week period a year ago.

In a market where even discount stores – who have seen an increase in customers looking to save cash – are reporting disappointing results, that’s something to brag about. BJ’s and Costco, for example, have faced unexpected challenges in recent months.

The clothing retailer now expects quarterly earnings to come in at the high end of its outlook, somewhere between 65 and 70 cents per share.

It also adjusted its forecast for the year, changing earnings from $2.17 to $2.22

Retailers were expected to post an overall decline of 1.2% in February same-store sales on Thursday… That follows a 1.8% drop in January, which was the second-worst monthly same-store sales performance since 2000.

All of this good news bodes well for the company, especially considering it’s occurring while other retailers around it are struggling to even stay above water.

Children’s Place Retail Stores Inc. (Nasdaq: PLCE): Stock of the Day

This from Greg:

The market has been kind to no one lately. Look no further than yesterday’s close for all the evidence most investors need to pack it up and hide their savings under the mattress for the next few years.

Unfortunately, most investors get it wrong. We all fight to pile into a hot stock, retreating once the share price plummets. Of course, that’s the exact opposite of what a savvy investor should be doing. Remember — it’s not about calling a bottom. It’s about buying low and selling high. It’s a simple concept that’s goofed seemingly every day when we let our emotions creep into our portfolios.

Right now, the market is low. Some of the beaten down stocks deserve to be in the basement. But like any bear market, there are some deals out there. So who’s bullish?

Minyanville.com CEO Todd Harrison is. Harrison told Yahoo! Finance that he believes a “monster move” is in store for stocks by spring.  Harrison isn’t a perma-bull, either. In fact, he’s been quite bearish for the better part of the past year. Now, he’s telling the press that the S&P could hit 1,000 very soon.

Harrison’s prediction is closely linked to financials. He told Yahoo! that financial stocks could spark a rally due despite the intense negativity in the sector. While we find this interesting, we wouldn’t follow Harrison into his Bank of America (NYSE:BAC), Morgan Stanley (NYSE:MS) and Wells Fargo (NYSE:WFC) plays just yet…

Berkshire Hathaway (NYSE:BRK.A / BRK.B)captain Warren Buffett has not been so publicly bullish…but the legendary stock picker hasn’t exactly stayed quiet on the investing front. Buffett has spent his time sniping shares of the industry leading bottom-dwellers like General Electric (NYSE:GE), Goldman Sachs (NYSE:GS), and Swiss Re.

You and I may not be able to purchase preferred shares through private deals or buy up corporate debt like Buffett is doing these days. But for individual investors with a small-cap focus, there are ways to play the recession and come out on top…

• First, you need to think cheap. No, we’re not talking about fundamentals (although it’s always good to take a look at price-to-sales, debt, and other important metrics before buying a stock). In this case, we mean cheap goods sold by discount retailers. When consumers are stretched thin, cheap stuff rules the roost. Don’t believe me? Just look at yesterday’s drop. As of 4:00 p.m., only one Dow component had posted a gain: Wal-Mart. For the small-capper, screen for retailers with market caps less than $1.5 billion and you should find some interesting plays related to this idea. And for this screen, avoid specialty retailers and stores that primarily sell big-ticket items.

• During tough times, sin wins… Sin stocks are the comfort food of troubled times. A consumer who recently lost his job probably isn’t going to go out and buy a new car. But by the same logic, he isn’t going to give up his beer and cigarettes, either. In fact, the best performing stocks during past recessions have been tobacco and alcoholic beverages.

• Find the necessities. We’ve already talked about the top two recession gainers from the chart above. But what about household products? Yes, families are cutting back. But we seriously doubt they’ll stop buying toilet paper and bleach just because they’re stretched thin. There are plenty of items every family can’t live without. Companies that make the goods should do just fine…

Source: Three Steps to Turn a Profit in This Recession

This from Smart Profits Report:

‘Tis the season to… well, spend. And in a credit-oriented nation, Americans again proved that they do that better than the rest. The National Retail Federation (NRF) says 172 million consumers hit the malls or logged on to buy goods over the extended Thanksgiving weekend – a 17% jump from the same period in 2007. And ShopperTrak says “Black Friday” sales rose 3% to $10.6 billion over “B.F. 2007,” with the average consumer spending $372 – up 7.2% from a year ago.

Granted, a 3% sales rise isn’t spectacular, but it’s not terrible for a nation with a pathetic savings rate, a 3.7% year-over-year inflation rate in October, and 1.2 million job losses. I’m sure America’s battered banks are wondering exactly where these guys are getting their money from – and whether they can pay it back.

Retailers are doing their best to help – and potentially at their own expense…

The Retail Sector’s Vicious Cycle

Many still predict a rough time for retailers, with the NRF predicting a measly 2.2% rise in holiday shopping sales – the lowest since 2002. Retailers are compelled to offer eye-popping deals to cash-strapped consumers, but they can’t sustain the bargains forever, for risk of eroding their profit margins too much.

That could result in flat sales and profit growth, with some analysts suggesting that it could also lead to more bankruptcies, following electronics giant Circuit City, Linens n’ Things, and The Sharper Image. In turn, that could drive unemployment even higher.

Already, a major online trend is providing some clues…

When High Traffic Meets Falling Sales

The good news: Online traffic on “Cyber Monday” (the Monday following Thanksgiving, which traditionally kicks off the online shopping season) climbed by 10% over the same day in 2007, according to Pricegrabber.com. Other firms have also reported heavy activity, with Target (NYSE: TGT) expecting its web traffic to jump 40% this season.

The bad news: Online research firm comScore says web sales are down 4% so far this season and will remain the same as last year throughout the November-December compared at $29.2 billion. That’s prime evidence that deep discounts could squash profit margins. But essentially, retailers have little choice.

But what choices do investors have?

“It’s Wal-Mart Time”

A few weeks ago, my colleague Marc Lichtenfeld gave you three companies that could be set to buck the gloomy retail trend this season.

One of them was sector bellwether Wal-Mart (NYSE: WMT), whose CEO Lee Scott proudly proclaims, “It’s Wal-Mart time. This is the kind of environment that Sam Walton built this company for.”

He’s right. As consumers go all-out to dig up value, Wal-Mart is among those discount-oriented firms set up to not only weather this season’s storm, but to profit from it. Check out Marc’s article for more details, plus his thoughts on Kohl’s (NYSE:KSS) and Dollar Tree (Nasdaq: DLTR).

I’m going to throw another one into the mix – The TJX Companies (NYSE: TJX) – a company I actually highlighted here a year ago…

The Outlook For TJX

At the time, the stock traded around $28.50 and bounced to $32 by early February 2008, followed by a 52-week high of $37.52 in August.

Since then, however, shares have sunk back to the $20 area, as a combination of high oil prices at the time stifled consumer spending, while the U.S. dollar (the company also operates overseas, including Britain and Ireland), economy and stock market slumped.

Despite this, though, the firm reported a 4% and 3% sales rise in August and September respectively, compared with August-September 2007. That’s a testament to its business model – the company offers fashionable, quality goods (some of which it buys from other higher-end retailers’ excess inventory) at attractive prices.

However, total third quarter profit came in at $235.8 million ($0.54 per share), compared with $249.5 million ($0.54 per share) in Q3 2007 – a 5.5% drop, due to the negative economic climate and an exchange rate hit. Over the first nine months of 2008, though, TJX earned $629.9 million ($1.42 per share) over the $470.6 million ($1.00 per share) from January-September 2007.

TJX pegs fourth quarter EPS between $0.58 and $0.62 – lower than the $0.67 in Q4 2007 and the $0.72 estimates, but $2.07 to $2.11 per share in fiscal 2009, compared with $1.68 for this year.

Also, the company’s T.J. Maxx and Marshall’s stores could be prominent destinations for bargain-hunting shoppers this season. The fact that The Gap (NYSE:GPS) posted better than expected third quarter results could bode well for TJX. Other positive factors include the U.S. dollar strengthening a little and Card Activation Technologies settling its litigation against TJX.

Ultimately, fourth-quarter retail earnings will tell the full story of this holiday period

And while the overall gloom shrouding the retail sector could drag successful, bargain-oriented companies down with the pack in the short-term, provided their business models lure in discount-hungry consumers this season, they could end up having the final word.

Source: Tune Out The Retail Doomsayers… These Firms Could Bust This Season’s Trend

Stores like Whole Foods (NASDAQ:WFMI) and Trader Joes are watching their customers head to low-cost competitors like Wal-Mart (NYSE:WMT) and Safeway (NYSE:SWY).

It is no surprise to see an ultra-cheap retailer like 99 Cents Only Stores (NYSE:NDN) climb its way to the sole spot on the list of companies reaching 52-week highs today. The global economic crisis has actually been the best thing to happen to the company’s share price in a long time.

The rationale behind the positive run is obvious. When the economy is in the gutter, consumers have less money to spend on the things they need. So they go to the cheapest retailer they can find.

A wino’s delight

When we need a toothbrush, why spend $4.99 on a fancy name-brand brush when you can get one for less than a buck?

Or how about cleaning supplies? Or stationary? 99 Cents Only even sells bottles of wine at its namesake prices.

Of course, 99 Cents Only is not the only ultra-cheap retailer doing well these days. Dollar Tree (NASDAQ:DLTR) and Family Dollar (NYSE:FDO) are both multi-billion dollar companies making their investors money over the past few months.

While these companies may appear as an oasis in a desert of losses, investors need to use caution. All three stocks have gotten a lot of attention lately and are becoming overpriced.

****** Oil at $70 a Barrel — Gold at $500 by Christmas? ******
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What if they’re right?

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For example, after more than doubling its share price since July, 99 Cents Only has a price-to-forecasted-earnings ratio of over 30. If the next earnings report misses expectations by only a small margin, shareholders could be in for a sizeable drop.

Granted, sales have increased over the past three months and are likely to surge even higher during this quarter, but the competition is catching up. Traditional retailers, which are often slow to react to economic waves, are finally making moves to target consumers during a recession.

Eye-catching sales and incentives are drawing cash-conscious consumers back into retail stores. Beyond that, ultra-discounters do not offer all the products consumers require. They will still head to the more-expensive “big box” stores for their needs.

Consumers are changing their habits, leading savvy investors to follow. Track the trends and invest appropriately and you could be one of the traders celebrating a 52-week high today.

Source: Cheap date: 99 Cents Only Store (NYSE:NDN) hits 52-week high

As I was doing my usual bout of “marathon weekend reading” I came across an interesting piece on Warren Buffett’s recent trip overseas. For those who don’t keep tabs on the “Oracle,” Buffett has been touring Europe for the last week or so in an effort to promote Berkshire Hathaway on the other side of the pond.

Reason being, Buffett’s looking to start buying up “family owned, privately held” businesses on the cheap overseas.

It’s difficult for him to find “Buffett-sized” deals in the U.S. anymore, so it only makes sense that he’d look for greener pastures elsewhere. However, Buffett also gave another reason for why he might want to start placing his bets in other parts of the world…

My friends and I have been debating the “recession” topic for a while now: Are we currently in one? Will we run into one this year or next? What will the effects be?

But when I read that Buffett thinks the U.S. is already in a recession and it will be “longer” and “deeper” than any we’ve seen for quite some time, I definitely began to think less about “what if we go into a recession” and more along the lines of “What should I do with my money now?”

There are dozens of questions (and even more answers) on TickerHound about which sectors hold up the best during a bear market, but a recent question is what inspired me to write today’s article:

“Will certain retailers do well during a recession?”

Traditionally, retailers don’t do well at all during a downturn — consumers start to curtail their discretionary spending as times get tougher, and items like clothes, cars and all the other little “extras” aren’t ranked very high on the “purchasing priority list.” However, if you really think about it, there are some retailers that “should” do rather well during a protracted downturn.

The fact of the matter is, people aren’t going to completely stop buying the little extras, they’ll just be more selective about where they buy them.

While I’ve come a long way since my childhood, I still remember what it was like when times were tough around my house. We were a blue collar household, three kids, my parents were always hustling at the end of each month to make ends meet — so when one of us needed new clothes, school supplies, etc, we’d take a trip to the closest discount store and bargain hunt.

Without doing a survey of every household in the U.S., I’d bet that when times are tough and a recession is imminent, most of America behaves the same way. In fact, if you take a look at a 10-year chart for some of the discount retailers, you’ll immediately see that their stocks do better when the market is doing worse!

So here are a few discount retailers that I think are worth digging into if you’re looking for some “Retailers for a Recession”:

1. Dollar Tree (DLTR: NASDAQ)

• Market Cap: $2.99 Billion
• P/E: 15.67
• Dividend: N/A
• 12 Month Price Gain (Loss)%: (19%)

2. Family Dollar Stores (FDO: NYSE)

• Market Cap: $2.76 Billion
• P/E: 13.5
• Dividend: 2.5%
• 12 Month Price Gain (Loss)%: (40%)

3. Fred’s (FRED: NASDAQ)

• Market Cap: $438.65 million
• P/E: 41.13
• Dividend: 0.7%
• 12 Month Price Gain (Loss)%: (25%)

4. 99 Cents Only Stores (NDN: NYSE)

• Market Cap: $538 million
• P/E: 85
• Dividend: N/A
• 12 Month Price Gain (Loss)%: (46%)
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