While reviewing the winners from Trading Ideas for Tuesday, I saw some big names in the retail-apparel industry on the list.

There has been much talk about the health of the consumer. The economy is slowing down and the back to school season is in full force. Let’s take a closer look at what the price action and the financial media has been saying of late.

Foot Locker, Inc. (FL)

• Foot Locker Q2 profit beats Street; shares jump
  Athletic-shoe retailer Foot Locker Inc (FL) posted a second-quarter profit, soundly beating market estimates, as fewer discounts boosted margins, sending its shares up as much as 11 percent.
• A Big Step for Foot Locker
  We are seeing far better consumer acceptance to marquee footwear than we had expected coupled with an increase in the number launch products.
  The U.S. business in the second quarter was down low-single digits, Europe was down mid-single digits, Canada was up mid-single digits, Asia Pacific was up high-single digits, and (Foot Locker subsidiary) Eastbay was up 15%.

The Gap Inc. (GPS)

• Gap helps lift retail stocks
  Gap (GPS) shares jumped almost 5%. Gap’s second-quarter profit rose 51%, after the company controlled inventory and expenses to help offset declining sales. The company also lowered its capital spending forecast as it plans to reduce the number of store openings
• Gap Promotes Interim Old Navy Head to Permanent Role
  Gap Inc. promoted Tom Wyatt, interim president of the Old Navy chain, to be the unit’s permanent chief as the biggest U.S. clothing retailer tries to boost sales at its largest division by revenue.

Limited Brands, Inc. (LTD)

• Limited Brands Rises on Higher Annual Profit Forecast
  Sales at stores open at least a year decreased at both Victoria’s Secret and Bath & Body Works, which sells shampoo and lotion, as consumers facing higher gasoline and food prices skipped the mall. Chief Executive Officer Leslie Wexner’s plan to slash inventory and reduce capital expenditures may allow the retailer to preserve profit during a holiday season in which consumers have less money to spend.
• Limited Brands up after profit beats estimates
  Shares of Limited Brands Inc., owner of Victoria’s Secret and Bath & Body Works, rose Thursday after the company reported second-quarter profit that exceeded analysts’ estimates and raised its full-year outlook.

As we can see from the recent earnings news, Wall Street has been pleasantly surprised by how well these companies are handling the the difficult economic environment. The most interesting quote regarding LTD earnings was “When the consumer recovers, it’s off to the races,” by analyst Todd Slater of Lazard Capital Markets LLC. Will this apply to the whole sector? That is the key development to be watching for.

In addition, the upcoming holiday seasons are going to be very important to get a pulse on how the consumer is doing.

Charts shown in today’s post have our Relative Momentum Indicator (RMI) and InVivo Universal Stops applied. Our TrueBlue suite of trading tools will be released in September!