Recession Brings Investors to Stores That Sell Overalls
While Saks and Tiffany flop in the stock market, retailers specializing in rural America soar — thanks to a weakening economy.
When the going gets tough, the tough shoppers stay away from Saks. They do go to Family Dollar and Wal-Mart, and for that reason lower-end retail companies found favor late last week in the stock market.
The thinking on Wall Street last week was that no matter what happens in the economy, people will still need to buy clothes. But during a recession, they won't be looking to spend a lot of money. So the stocks of the joints where you can still pick up a pair of overalls and piles of white socks went up. Meanwhile, Tiffany & Co. has lost 17 percent of its value this year and Saks is off 38 percent since the beginning of 2008. In a recession, you don't wear Prada to the Chamber of Commerce banquet.
There aren't many Tiffany or Saks Fifth Avenue stores outside the cities, and so these high end retailers are not part of the Yonder 40, the stock index fund of rural America. That's been a good thing — for the Yonder 40 anyway.
Last week, the rural stock index was bouyed by rural retailers. Cato Corp was up over 5 percent. Family Dollar rose nearly 11 percent. Stage Stores rose an astounding 18 percent in four days of stock trading. Tractor Supply (which sells "The stuff you need out here") was up over 12 percent And Wal-Mart Stores rose nearly 7 percent and closed the week at its highest price in three years.
According to Wall Street Journal reporter Karen Talley, "investors sense that consumer trepidation has settled in and the more they worry about the economy, the less they are going to spend. And when they do make purchases, it will be at places they feel they can get the most for the dollar."
So, rural retailers are in…for the moment.
There was other news affecting the Yonder 40 in the past week:
“¢ Bassett Furniture was up nearly 6 percent last week on news that the company was hiking its quarterly common dividend 12.5 percent, to 22.5 cents from the 20 cents per share it has paid since 1993. Bassett also expanded its stock-buyback fund by $20 million.
“¢ The French government banned a genetically modified strain of corn (MON810) made by Monsanto last month. Just last week, the country's highest administrative body rejected a challenge to that ruling from a group of French farmers. France's Provisional High Authority on GM Organisms banned the Monsanto product, pointing to what it described as "a certain number of new scientific facts relating to a negative impact on flora and fauna," according to the Wall Street Journal.
“¢ Food companies are scrambling to find ways to deal with the rising costs of commodities. Kellogg is hedging its commodity costs for the year, hoping to hold down the price of Pop-Tarts and Special K breakfast cereal. Tyson says it expects to spend $500 million more this year to feed its chickens. Kraft Foods spent $1.25 billion more on commodity costs in '07 than it did in 2006.
Here are the results for the Yonder 40 stock index for the week ending March 21:
|Yonder 40||Ticker||Price March 21||Price Change 3/14 to 3/21||Percent Change 3/14 to 3/21|
|Burlington Northern Santa Fe Corp.||BNI||$91.61||$0.81||0.9%|
|Peabody Energy Corp.||BTU||$47.45||-$4.91||-9.4%|
|ConAgra Foods Inc.||CAG||$22.26||$0.98||4.6%|
|Cato Corp. Cl A||CTR||$16.57||$0.80||5.1%|
|Deere & Co.||DE||$79.23||-$3.65||-4.4%|
|Dean Foods Co.||DF||$20.23||$0.61||3.1%|
|Family Dollar Stores Inc.||FDO||$20.50||$1.98||10.7%|
|Fleetwood Enterprises Inc.||FLE||$4.47||$0.15||3.5%|
|Gaylord Entertainment Co.||GET||$30.02||$2.84||10.4%|
|International Speedway Corp.||ISCA||$39.92||$0.97||2.5%|
|Mohawk Industries Inc.||MHK||$75.06||$5.92||8.6%|
|Mine Safety Appliances Co.||MSA||$42.09||$0.51||1.2%|
|Plum Creek Timber REIT||PCL||$41.13||$1.80||4.6%|
|Penn Virginia Corp.||PVA||$38.99||-$2.93||-7.0%|
|Regions Financial Corp.||RF||$21.72||$1.47||7.3%|
|Sturm Ruger & Co.||RGR||$7.91||-$0.04||-0.5%|
|Stage Stores Inc.||SSI||$16.92||$2.56||17.8%|
|Tractor Supply Co.||TSCO||$41.22||$4.50||12.3%|
|Waddell & Reed Financial Inc.||WDR||$33.84||$3.04||9.9%|