The 2009 year in equity markets is shaping up to be one of ironies, with one of the biggest being the share performance of many discretionary retailers. Despite the market rally, it appears that American consumers do not feel any richer. In fact, they remain unwilling to consume at even half the level they were accustomed to back in 2006. Just look to the strong sales and profit growth at deep discounters like Big Lots (NYSE:BIG) for great insight into the newfound thrift of the American consumer.

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A Rally for Mr. Market
To say that many retailing stocks enjoyed this year's rally is a huge understatement. It seems that the weaker the business, the stronger the share price appreciation. No example is more confirming than that of Bon-Ton Stores (Nasdaq:BONT), the shares of which have appreciated over 1,000% going into early December. A $210 million company with over $1 billion in debt, Bon-Ton had no income to speak of in 2009. But, hey, if you managed to catch any part of this ride, congratulations on being one of the lucky ones. Today, these shares are priced for more than perfection. But so far in 2009, all that matters is that it was a great year for Bon-Ton stock.

The same goes for other names like Crocs (Nasdaq:CROX), the maker of those once-popular rubber slippers. Buying a few shares earlier this year would have netted a near 400% return going into December. (For related reading on this sector, check out Analyzing Retail Stocks.)

What About Quality?
Other retailers that one would think would do very well have done great, but nothing like the performance of those stocks mentioned above. The TJX Companies (NYSE:TJX) was up nearly 80% going into December, and department store chains Kohl's (NYSE:KSS) and Macy's (NYSE:M) both were up over 50% over the same period. The performance of retailers thus far in 2009 likely has more to do with a surge in investor appetite for risk as opposed to any true fundamental change.

Bottom Line
I would be very surprised if these retailers continued this impressive run going into 2010. In fact, those retailers that continue to report losses may suffer a downfall just as significant as the upward climb. Either way, 2009 may likely go down as one of the most generous years to the stock price performance of many of the most speculative retailing names. (For more about the effects of recession on businesses, read The Impact Of Recession On Businesses.)

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Tickers in this Article: BONT, CROX, BIG, KSS, M, TJX

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