Has Retailing Become A Zero Sum Game?

Looking at recent earnings reports from the country’s major retailers, it is apparent that some have been very successful, handily beating expectations, while several have reported disappointing results and provided reduced guidance, with surprisingly few in between.  Has retailing devolved into success based on grabbing market share?  To some extent, this may be the case.  However, retail has been one of the stronger segments of the U.S. economy with consumer spending often credited with providing the foundation of economic growth.

Growth in consumer spending should not come as a surprise.  The U.S. economy is benefiting from an increasing population, with very low unemployment, more people working, and rising wages.

Investors should consider that, given a generally positive environment, gains for individual retailers are likely to reflect management.  We have long held that management matters, see our blog from July 2013 titled Does Management Matter?

All comments and or suggestions are welcome.

Walter J. Kirchberger, CFA