Nordstrom, Saks defy skeptics with higher sales
Luxury retailers still look as the well-to-di, at least, haven't stopped spending.
By Michael Brush for MSN Money
Luxury retailers Nordstrom (JWN) and Saks (SKS) blew away their September sales estimates this morning, posting impressive revenue gains of 10.7% and 9.3% for the month, at stores open more than a year.
This confirms my take, published earlier this week in “Time to check out Saks, Tiffany,” that the consensus view was wrong and that high-end shoppers, at least, haven't closed their wallets.
The upshot: luxury retailers are a buy here, since most of them have sold off way more than the market and sales are promising.
But there's another investing insight here. The consensus miscue on luxury retailers is a great example of a major theme running through the market right now. Given the memories of 2008, a lot of people remain stuck in crisis mode, looking under every rock for the next danger and finding risks even where they don’t exist.
While this is the mentality of the market, stocks will remain weak. But this can only last so long. Sooner or later, the credibility all of the those dwelling on the fears will diminish. Stocks will find a footing, then rally. Probably at some point during the next six months.
Sentiment is just too bearish right now, and the false fears about luxury shoppers too scared to spend bear this out. Remember, that in the contrarian sense, extremely negative sentiment is bullish because the most money is made in the market by betting against the crowd. Right now, that means getting long stocks.
As Warren Buffett famously says, be fearful when others are greedy, and greedy when others are fearful. Fear is now rampant, a demonstrated by the concocted worries about a supposed slow down in luxury spending. Time to get greedy, and buy stocks.
At the time of publication, Michael Brush did not own any shares mentioned in this post. Brush is the editor of Brush Up on Stocks, an investment newsletter.