Retail Sales Send a Mixed Message: Target Corporation (TGT), The Gap Inc. (GPS), Limited Brands, Inc. (LTD)

One of the things investors need to watch out for is that this growth comes at a time when it probably shouldn’t. Payroll taxes and gas prices have risen over the past few months, and as a JPMorgan Chase & Co. (NYSE:JPM) analyst said, “[The consumer seems] to be shrugging off the massive drag to income from higher tax bills and has continued spending as though nothing’s changed.” He thought that was good news, but I’m not so sure.

The worry I have is that companies at the higher end are benefiting from consumers who are spending money that they don’t have. That’s going to mean that when the bill catches up, everything is going to slow down again. It’s like a rubber band — you can pull it out and get some distance, but eventually it’s going to snap back. It would be silly to call it a bubble, but lending is on its way up — last quarter’s increase was the biggest in four years. That’s good if it stimulates the economy, but it’s not good if it means people are just buying things they can’t really afford.

The bottom line
The February sales report should be cause for cautious optimism. Sales at specific retailers are more important to investors than sales across the board. The increase in lending may end up being a great thing for retail investors, and I think it’s probably going to be very good news for broad sellers like Target Corporation (NYSE:TGT). Those companies saw a 0.5% increase in February, which put them ahead of the curve. If that trend continues, it may lead to an interesting situation for high-end retailers, who will be fighting for consumers’ cash. I’ll be watching Target Corporation (NYSE:TGT) and Kors very closely over the next quarter.

The article Retail Sales Send a Mixed Message originally appeared on Fool.com.

Fool contributor Andrew Marder owns shares of Williams-Sonoma. The Motley Fool recommends Williams-Sonoma and owns shares of JPMorgan Chase (NYSE:JPM).

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