Retail stocks surged Thursday, as June same-store sales sparked investor euphoria. The jump probably stood out even more sharply against a still-tough economy for many U.S. consumers. However, if this sudden elation has you thinking about snapping up retail shares yourself, make sure you shop with more than a little caution.

The Scoop on Same-Store-Sales
Same-store sales -- also known as comparable-store sales, or "comps" for short -- are a very closely watched retail metric. Comps track sales growth in retailers' stores open for at least a year, helping investors gauge the success of a retailer's brand. Some retailers report this figure monthly, giving investors the most informational bang for their buck, while others report the figure quarterly.

Either way, investors should always weigh the data carefully, taking it with a grain of salt and a heaping shovelful of historical context.

June's same-store sales included several major retail victories, including Costco's (COST) 8% surge. For a little of that historical context I mentioned, Costco's comps increased 4% last June; thus, its gain this time around doesn't simply owe to an easy comparison with a lousy month last year. The warehouse chain keeps piling on increased sales and consumer traffic, testifying to this company's brand strength and customer loyalty.

One of the most impressive June same-store sales gains came from Limited Brands (LTD), the name behind Victoria's Secret and Bath and Body Works. (Ironically, the company's no longer associated with its former namesake, the mall-based store The Limited.) Limited's June comps increased by 12%, which is quite impressive compared to its 6% increase in same-store sales last June.

On the other hand, struggling Gap's (GPS) same-store sales nudged up 1% in June. Last June, Gap's comps stayed flat compared to a 10% decrease in June 2009. In this case, same-store sales tell us that Gap may be slowly improving -- but it's not really back.

Don't Get Sucked Into Making an Uninformed Impulse Purchase
June retail sales looked pretty heartening, but one good month's comps data doesn't tell the whole story. Digging in for historical same-store sales information, including sales and earnings over time, creates a far better picture of a company's success.

In other words, avoid those impulse purchases when other investors get caught up in the moment. Just like the most successful shopping trips, taking the time and doing the research can help you pick the best stocks at the best prices.


Motley Fool analyst Alyce Lomax owns no shares of any of the companies mentioned. The Motley Fool owns shares of Gap, Limited Brands, and Costco Wholesale.

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mmcdonald2k

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Michael McDonald

July 23 2011 at 12:17 AM Report abuse rate up rate down Reply
caohellsux1978

Hi everyone! I got so tired of clicking on the link "Latest Financial News", and looking at stories that have been there over a month. Their top story has been there since January! And the stories that are actually current, you cant comment on them! I moved over to Yahoo. There pages are much, much better. You actually get current news, and you can even comment! What a novel idea!

July 12 2011 at 6:46 AM Report abuse rate up rate down Reply
gmini10

Revive the WPA!!!

July 10 2011 at 4:41 PM Report abuse rate up rate down Reply
shiloh1388

Stocks are 95% more or less, a ponzi scheme Joe Kennedy left as an open sore, to harm America. Afterall, he was Nazi sympathizer and negligent as US Ambassador to Great Britain. And his pervert disabled son became President. Most Corporations take the investors money and run to pay themselves huge salaries, then Hype it up in razzle dazzle business news land, so their stock is a good little NYSE or Nasdaq, quack quack, scam, and goes up and down in price like the other ducky stocks. Oooh, yum, yum, butter em' up, stinko cup.

July 09 2011 at 8:26 AM Report abuse -1 rate up rate down Reply
1 reply to shiloh1388's comment
bigpapapuff425

You are a moron of the worst type!!

July 10 2011 at 5:15 PM Report abuse +1 rate up rate down Reply
vcgh2000

barry...where are you???

July 08 2011 at 11:28 PM Report abuse -1 rate up rate down Reply
Morris Cantonitis

Over Due for a Correction
That is.
Not our markets.
It’s the wall alley pigletts & Red Plague dUE for a CORRECTION and correctional facility;
and like no facility on this EARth
Yes Indeed.
Pursuit of EVIL Man in 2011, 201x, 201 & u will c what it brings u.
Storms RIP thru America.
EVIL begets EVIL in 2011, 201x, 201
What is an insider?
Werare333 and weareinsiders.
Yes. A pre press, pre printed release details wall alley & Red Plague PIGG daarck path
U r on WANTED posters in Christ Kingdom bad piglets.
Satan conjures and takes Bounties ON ALL.

July 08 2011 at 9:30 PM Report abuse -1 rate up rate down Reply
1 reply to Morris Cantonitis's comment
bushsnitemare2

WOW!......THAT IS REALLY DEEP!

July 08 2011 at 9:45 PM Report abuse +1 rate up rate down Reply