Costco Misses Earnings, Holiday Sales Questioned

Richard Suttmeier
TheStreet.com

NEW YORK (TheStreet) - I have been tracking nine discount retailers and on Wednesday Costco reported an EPS miss of 6 cents a share earning 96 cents in the premarket. Share holders cried '96 tears' as the stock tumbled below its 50-day simple moving average at $119.95 after being above this moving average since Oct. 10. This is another warning that the Main Street economy is not growing up to potential.

The only discounter to be up from a month ago is Dollar General with a gain of 5.7% since Nov. 11 after gapping above its 50-day SMA at $58.33 on Dec. 5. The biggest losers since Nov. 11 are Ross Stores and Big Lots which are down 10.3% and 15.9% respectively.

Six of the nine discounters had gains of 24.2% to 56% over the last 12 months on Nov. 11, and today one month later only five have lesser gains of 20.6% to 47.2% over the last 12 months.

Retail sales for November will be reported this morning and are expected to show a rise by 1.1%, which could give these buy rated stocks a reprieve from further price declines over the near term.

Overall stocks are not cheap fundamentally as 81.9% are overvalued according to www.ValuEngine,com with 48.4% overvalued by 20% or more. The discounters are in the retail-wholesale sector which is 23.4% overvalued. The nine discount retailers in today's report are all overvalued but only one by more than 20%.

In Wednesday's down market four of the five of the major averages ended the day with declining 12x3x3 daily slow stochastic readings with closes below their 21-day simple moving averages at 15,960 on Dow Industrials, 1794.78 on the S&P 500, 7175 Dow transports and 1119.86 on the Russell 2000. The Nasdaq closed right on its 21-day at 4003, but with its stochastic reading moving below 80.00.

The weekly charts for the five major averages remain overbought but the Russell 2000 is just below its five-week modified moving average at 1110.25. The others are above their five-week MMAs at 15,800 Dow Industrials, 1774.1 S&P 500, 3957 Nasdaq and 7049 Dow transports.

Big Lots ($31.03 vs. $36.88 on Nov. 11) is down 15.9% since Nov. 11. The stock 4.2% overvalued and still has a gain of 9.8% over the last 12 months and is below its 200-day SMA at $35.67 with a low trade of $30.22 on Tuesday. My quarterly pivot is $36.41.

Costco ($118.57 vs. $123.02 on Nov. 11) down 3.6% since Nov.11. The stock is 18.3% overvalued with a gain of 20.6% over the last 12 months and is above its 200-day SMA at $113.33 with a low trade at $116.97 on Wednesday. My semiannual value level is $103.24 with quarterly and semiannual risky levels at $121.21 and $124.36.

Dollar General ($61.31 vs. $58.01 on Nov.11) is up 5.7% since Nov. 11. The stock is 17.4% overvalued with a gain of 42.8% over the last 12 months and is above its 200-day SMA at $54.18 setting a new all-time intra-day high at $61.82 on Wednesday. My semiannual value levels are $56.97 ands $56.53 with a quarterly risky level at $62.53.

Dollar Tree  ($55.90 vs. $59.06 on Nov. 11) is down 5.4% since Nov. 11. The stock is 9.2% overvalued with a gain of 47.2% over the last 12 months and is above its 200-day SMA at $52.49 and traded as low as $54.67 on Dec. 4. My semiannual value level is $52.56 with monthly and semiannual risky levels at $58.16 and $60.41.

Family Dollar  ($64.66 vs. $68.54 on Nov. 11) is down 5.7% since Nov. 11. The stock is 1.8% overvalued and is flat over the last 12 months and is below its 200-day SMA at $66.24 trading as low as $64.59 on Dec. 11. My annual value level is $49.09 with a semiannual risky level at $73.03.

Ross Stores ($70.39 vs. $78.50 on Nov. 11) is down 10.3% since Nov. 11. The stock is 9% overvalued with a gain of 28.7% over the last 12 months and is above its 200-day SMA at $67.65 and traded as low as $70.39 on Wednesday. My annual value level is $54.56 with semiannual risky levels at $79.86 and $82.91.

Target  ($62.93 vs. $65.69 on Nov. 11) is down 4.2% since Nov. 11. The stock is 12.7% overvalued with a gain of just 2.4% over the last 12 months and is below its 200-day SMA at $67.48 and traded as low as $62.20 on Dec. 4. My annual value level is $53.54 with monthly and annual pivots at $64.91 and $65.45 and a semiannual risky level at $72.47.

TJX Companies  ($61.35 vs. $61.69 on Nov. 11) is down just 0.6% since Nov. 11. The stock is 28.6% overvalued with a gain of 43.9% over the last 12 months and is above its 200-day SMA at $52.92 after setting an all-time intra-day high at $64.09 on Nov. 21. My annual value level is $52.67 with monthly and quarterly risky levels at $63.73 and $63.94.

Wal-Mart Stores  ($79.09 vs. $79.01 on Nov. 11) is up just 0.1% since Nov. 11. The stock is 9.9% overvalued with a gain of 11.6% over the last 12 months and is above its 200-day SMA at $76.22 and set an all-time intra-day high at $81.37 on Dec. 4. My semiannual value level is $74.96 with a monthly pivot at $78.66 and weekly risky level at $82.23.

At the time of publication the author held no positions in any of the stocks mentioned.

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This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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