How on earth is J.C. Penney Co., Inc. (NYSE: JCP) still in business? I would have thought this company went out to pasture long ago. Seriously, does anyone shop at this store? I think my grandmother shopped there a very long time ago, but I honestly can't remember the last time I set foot in the place. I guess some brands just never die.

OK, I'm being a bit harsh here, but you get my point. The entire retail sector is filled with way too much capacity, and while that capacity lent itself to more choices and lower prices, the flip side is that profit margins were low. What happens when times get tough? Profit margins fall even further and losses become very possible.

We are now in difficult times, and retailers are being destroyed across the board. Even before the credit crisis that began in late September, firms selling consumer goods were already struggling.

If you lined up 1,000 economists, politicians and activists and asked them whether Wal-Mart Stores Inc.'s (NYSE: WMT) success during the current economic downturn was good for the country, you would get 1,000 different answers. The issue surrounding the world's largest retailer are that murky.

Wal-Mart's business model is about as basic as it gets -- -buy low and sell high (but still lower than many of its competitors). Founder Sam Walton was famous for demanding the "Wal-Mart discount" from suppliers eager to do business with the retailing behmoth. Their profit margins were not his problem. After flirting briefly and disastrously with attracting wealthier consumers, Chief Executive H. Lee Scott decided to get back to what the company knows best -- selling stuff cheaper than anyone else. That strategy has paid off.

The company is the only member of the Dow Jones industrial average whose shares have risen this year, according to Bloomberg News. The results it reported today would be the envy of most companies struggling in the faltering economy. Net income rose 9.8% to $3.14 billion, or 80 cents per share. Revenue soared 7.5% to $97.6 billion. The results handily beat Wall Street expectations.

Despite economic woes, cash-strapped consumers, and forecasts for a dismal holiday retail season, value investor Charles Mizrahi still sees value for long-term investors in high-end retailer Coach (NYSE: COH).

The editor of Hidden Values Alert explains, "Founded in 1941, Coach has grown from a family-run workshop in a Manhattan loft to a leading American marketer of fine accessories and gifts for women and men.

"Coach is one of the most recognized fine accessories brands in the United States and in targeted international markets. Its modern, fashionable handbags and accessories use a broad range of high-quality leathers, fabrics and other materials.

"The company has created a sophisticated, modern and inviting environment to showcase its product assortment and to reinforce a consistent brand position wherever the consumer may shop.

This post is part of a series in which TheStockAdvisors.com asked financial experts to name their top stock pick if McCain or if Obama wins the election.

"Obama's tax plan would give greater relief to the lower and middle classes; one retailer that would benefit from this is American Eagle Outfitters (NYSE: AEO)," says John Reese, editor of Validea, which follows the investment criteria of "legendary" investors such as Warren Buffett and Peter Lynch.

"Consumers have had to tighten their wallets and purses because of the slowing economy and rising food and fuel prices. Breaks for average Americans would be welcome news for retailers, which have sputtered amid the downturn.

"In the event of a retail surge, this teen-focused Pittsburgh-based clothing chain should be at the head of the line.

"American Eagle gets approval from two of my Guru Strategies -- computer models that are each based on the published approach of a different Wall Street great. What's more, the two strategies that like the firm are modeled after two of the greatest gurus, Warren Buffett and Peter Lynch.

"My conservative Buffett-inspired model looks for stocks with a lengthy history of steadily increasing earnings, as well as a conservative balance sheet.

"Eagle has grown earnings per share in eight of the past ten years, with EPS rising from $0.25 to $1.82 in that time, meeting the first criterion. In addition, the firm has no long-term debt, which my Buffett model loves.

Ever read an earnings report and say to yourself, "man, there's just nothing going on here?" I did exactly that Wednesday with Bed Bath & Beyond (NASDAQ: BBBY) and its second-quarter report.

To be fair, something is going on with the retailer. Earnings per diluted share decreased 16% to 46 cents. And net cash from operating activities took a big 40% dive, coming in at $168 million. So, yes, something is going on, it just isn't anything good.

And if you think those stats are bad, consider that same-store sales for the quarter went down by 0.1%. Okay, is it really fair to point out that comps declined by 0.1%? Shouldn't I have just said "flat" instead? I mean, it's almost like rubbing the depressing results in the face of management by literally writing the exact percentage that comps declined at when said percentage is so unequivocally small. Hey, maybe management needs a reminder that, in the year-ago quarter, comps were actually up to the tune of 2.2%. What happened?

Well, I will cut some slack here since we are in the grips of an economic mess and I certainly would assume that all the problems in the housing industry are taking their noxious toll on the retailer. I'm not sure consumers are in the mood to buy a lot of bathroom accessories while Congress is trying to figure out how to keep the financial matrix from imploding.

J. Crew Group's (NYSE: JCG) stock is not a thing of beauty. The retailer's shares have been weak for a long time, and the latest quarterly numbers did nothing to change my mind about the stock's prospects.

For the second quarter, J. Crew, whose competitors include Abercrombie & Fitch (NYSE: ANF) and Gap (NYSE: GPS), reported a 10% increase in top-line sales. Not bad, I suppose. But I'll tell you what, there is some bad to come. Operating income went down 15%. Gross margin saw an unfortunate decline, dropping from 43.7% to 41%. And earnings per diluted share came in at 28 cents compared to last year's 32 cents per diluted share. That's a better than 12% drop.

Now, there is something to consider with the stats. The earnings release states that a systems upgrade in the direct-sales channel is affecting the results. In fact, there apparently were some costs related to the upgrades that were unexpected. Management says that this sum was equal to $3 million. In theory, these upgrades will help to position the company for long-term growth.

Aeropostale (NYSE: ARO), a retailer whose colleagues include Abercrombie & Fitch (NYSE: ANF), Pacific Sunwear of California (NASDAQ: PSUN) and Gap (NYSE: GPS), issued its Q2 report on Thursday. The stock didn't do much after the numbers were made public despite reporting a very nice 21% increase in sales during Q2, and a whopping 63% jump in earnings per diluted share to 31 cents. Why such a blasé reaction? Well, the retailer was only able to match the expectations of Wall Street analysts, so that might offer some justification for the lack of a decisive bid.

I felt the same way after reading Aeropostale's earnings release as I did after perusing the stats behind GameStop's (NYSE: GME) recent quarter, thinking the company deserved at least a little excitement, especially when one considers that last year at this time, the mall chain saw a 4% contraction in same-store sales. Of course, there is one understandable difference between the GameStop situation and the Aeropostale scenario. GameStop's stock wasn't trading near a 52-week high, and Aeropostale's shares are. So, perhaps the market is perceiving that a lot of the good news is already priced in.

Aeropostale has done well this year. Its stock is up over 28%. Should that concern potential investors? Perhaps. After all, this is a mall retailer based on fashion and investors must consider that Aeropostale's current hot streak could cool. If that happens, the stock might end up retreating back to the lower end of its 52-week range. While there are any signs that such a retreat will happen, I only want to throw into the discussion the concept of fickleness among the youth.

If you really like Aeropostale and want to buy its stock, it might not be so bad to wait for a better price, in my opinion, to allow at least a little margin for error.

Disclosure: I don't own any company mentioned; positions can change at any time.

Kohl's Corporation (NYSE: KSS) is up over 7% as I write this. Wall Street is apparently infatuated by the company's Q2 numbers, issued on Thursday after the bell. On the surface, however, one might question why there's such an interest. After all, the top line increased only 4% and the bottom line actually decreased 7% to $0.77 per diluted share. And, more dishearteningly, same-store sales, a vital metric for retailers, fell well over 4%. In fact, for the six-month period, same-store sales declined well over 5%.

Here's what Wall Street seems to be thinking. The gross margin expanded from 38.9% to 39.6% in the quarter. In the six-month timeframe, the gross margin expanded from 37.9% to 38.2%. Also, management increased its earnings outlook for the fiscal year from a range of $2.95 to $3.15 per share to $3.02 to $3.18 per share. This guidance assumes declines in comps of between 2% and 4% for each of the next two quarters. Kohl's beat estimates by $0.04, according to Briefing.com. And cash from operations more than doubled over the last six months to roughly $874 million.

All of that is pretty impressive, so I guess I can understand the buying of the stock to some degree. I do see some things to be concerned about, though. While gross margins went up, operating margins went down. Plus, I don't like the declining comps in this case. And I have to wonder how the economy will treat Kohl's in the coming holiday season. I definitely wouldn't be in a rush to chase this stock, especially after the run-up today. As I've said in other pieces on retail investing, Wal-Mart Stores, Inc. (NYSE: WMT) and Target Corporation (NYSE: TGT) are businesses I'd look at first in this sector. However, one thing I do have to concede is that the stock has been very strong lately, so there may be a case to be made for capturing some momentum here. Still, if I'm going for momentum, I might go with retail businesses that have stronger brand equities (in my opinion, at least).

Disclosure: I don't own any company mentioned; positions can change at any time.

Macy's (NYSE: M) didn't do too well in its second-quarter according to the earnings report, but it did beat profit expectations. Net revenues saw a decline of 3%, coming in at $5.7 billion. Adjusted net income from continuing operations was $0.29 per diluted share. According to this article, the call from the wizards of Wall Street was for $0.19 per share.

That's quite a beat, I'll grant you, but there are some caution signs investors must read regarding Macy's. As the article mentioned, the outlook isn't that great, and the retailer doesn't expect much from same-store sales as it goes into the autumn. In fact, sales should either be flat or will decline slightly. Same-store sales represent an important metric for retail chains, and if that metric can't be delivered, then investors need to take notice. For the quarter, comps were down a little over 2%. Over the last six months, comps were down by roughly the same amount.

Net cash provided by operating activities actually went up 44% to $592 million. The gross margin also improved. Cool stuff, perhaps, but they still don't change my bearish inclination toward the company. Macy's is still trying to turn itself around and become a player in retail, but it will be tough considering the economic challenges that the entire industry is currently facing. It's not going to be a strong holiday season for the company, and in terms of investment ideas, I'd still look at Wal-Mart (NYSE: WMT) or Target (NYSE: TGT) in the retail sector. I don't see any reason to put money to work in Macy's (some do, though, since the stock is up almost 2% as I write this, and it has done very well over the last month, according to the AOL Finance snapshot).

Disclosure: I don't own any company mentioned; positions can change at any time.

Shares of TJX Cos. (NYSE: TJX) fell in early trading after the discount retailer reported earnings that failed to impress Wall Street and gave guidance that fell short of expectations. The shares may still be worth adding to your portfolio.

Like Wal-Mart Stores Inc. (NYSE: WMT), TJX is benefiting from cash-strapped consumers eager to snap up the latest bargains. TJX, parent of TJ Maxx, is up 28% this year, outperforming Wal-Mart, which has gained more than 24%. The Massachusetts company currently trades at a forward price-to-earnings ratio of 15, below the Wal-Mart's ratio of 16. Wall Street analysts consider both stocks a buy.

Another thing in TJX's favor were the results in the quarter, which were spectacular. The company's net income tripled to $200.2 million, or 45 cents a share, a penny under Wall Street expectations. Revenue rose 7% to $4.6 billion, and consolidated comparable store sales increased 4% over last year.

The company expects to earn 59 to 62 cents in the third quarter on growth in same-store sales of 2% to 3%. Fourth quarter earnings are expected to be 79 to 81 cents. Analysts had forecast 62 cents and 79 cents for the respective quarters.

"In a very challenging retail environment, we delivered strong sales, merchandise margins and profit increases on top of very strong operating results last year," said Carol Meyerowitz, the company's chief executive officer, in the earninigs release.

"If you've visited a mall – or if you've ever bought clothing for toddlers – you might already be familiar with our latest Undiscovered Gem: Children's Place Retail Stores (NASDAQ: PLCE)," says Elizabeth Harrow.

In Schaeffer's Research, the technical and contrarian advisor explains, "The stock is on the ascent, but Wall Street isn't taking much notice."

"The company was founded in 1969, and is based out of Seacaucus, New Jersey. The retailing chain boasts a market cap of just under $1 billion. It is is a member of the S&P SmallCap 600 Index, as well as the S&P SuperComp 1500, which lends the shares a bit of Street cred.

"The firm recently pleasantly surprised investors with its same-store sales figures. During May, sales at stores open for at least 1 year rose by 10%, compared to analysts' expectations for a gain of 4.3%. Total sales for the month galloped 19% higher for the 4-week period ended May 31.

"Skechers USA (NYSE: SKX), a trendy California-based retailer, is a new buy recommendation on our 'hot list'," says John Reese, who selects stocks based on the criteria used by several legendary stock pickers.

In his always-fascinating Validea newsletter, the advisor explains, "Skechers gets approval from two of my guru-based strategies, those that I base on the writings of Peter Lynch and Kenneth Fisher." Here is his review.

"My Lynch-based model considers the firm to be a 'fast-grower' because of its 23.08% long-term growth rate (based on the average of the three- and five-year earnings per share figures).

"Lynch was perhaps best known for using the P/E/Growth ratio, which divides a stock's price/earnings ratio by its growth rate to identify growth stocks that are still selling at a good price.

"P/E/Gs below 1.0 are acceptable to my Lynch-based model, with those under 0.5 the best case. With a P/E of 10.99 and that 23.08 percent growth rate, Skechers has a P/E/G of 0.48, passing this critical Lynch-based test with flying colors.

In his Half-Priced Stocks newsletter, value investor Nathan Slaughter recently assessed stocks based on the general investment philosophy of Benjamin Graham, the noted value investor under whom Warren Buffett studied.

One issue that stands out in his view is Cabela's (NYSE: CAB), one of the world's largest specialty retailers of hunting and fishing gear, camping equipment, and outdoor apparel.

"The cornerstone to Graham's success and his enduring legacy to value investors was his 'margin of safety' concept. Specifically, he would take a hard look at dividend yields, price-to-book ratios, and other key metrics.

"Cabela's originated as a direct marketer and once primarily sold its products via catalog, but has since augmented that distribution channel with e-commerce operations and a growing chain of nearly 30 stores spread throughout 19 states.

Retailer Macy's (NYSE: M) first fiscal quarter wasn't that bad, at least in terms of the analyst game. The company, which competes with mall colleagues such as J.C. Penney (NYSE: JCP) and Sears (NASDAQ: SHLD), reported net income of 2 cents per diluted share from continuing operations. The denizens of Wall Street thought the company would lose 2 cents, so management came ahead in this regard by four pennies. Bravo!

However, does this news excite me? Not necessarily. Macy's needs a little help in its sales department. First, the overall top line declined almost 3%, coming in at $5.7 billion. Second, and perhaps even more telling, same-store sales were weak during the quarter, decreasing by 2.6%. And then there's the issue of cash flow. Operational cash flow from continuing operations was excellent compared with last year's quarter since $21 million was generated this time around as opposed to $370 million being used last time around. Nevertheless, when you take into account capital spending, no free cash flow was left over in the first quarter. And cash has been decreasing on the balance sheet. Oh, and gross margin went down, too.

I wasn't too taken by Macy's current earnings report, and I'm not putting the company on my list of investment ideas right now, even though the stock closed up yesterday on the news (heck, the company didn't repurchase any shares last quarter and stated that it didn't see any more share repurchases coming for the rest of the year, so apparently the stock isn't on management's ideas list, either). I think there might be better retail investments out there, such as Wal-Mart (NYSE: WMT) or Target (NYSE: TGT). Yes, the retailer may have strong associations with Donald Trump and Martha Stewart, but I will not be blinded by such celebrity value.

Disclosure: I don't own shares in any company mentioned here; positions can change at any time.

Wal-Mart (NYSE: WMT) has surprised some investors these past six months or so by putting up more than decent earnings results. After yesterday's huge rally, Wal-Mart has nudged up over $50 per share. At this level, the company's market cap has also just crossed over the $200 billion mark. But is the stock a buy here at $50 and a $200 billion cap and what are its near term prospects?

It has been hinted strongly that in this consumer-led slowdown that millions of Americans are "shopping down" on daily staples at Wal-Mart instead of going to pricier competitors. If this is a temporary phenomenon, Wal-Mart should see a good April 30th quarterly result with momentum building to the July 31st quarter.

Long term, however, Wal-Mart is more of a market performer than an out-performer. Consensus estimates for the fiscal year ending January 31, 2009 calls for revenue of $405 billion and EPS of $3.40 and for fiscal year 2010, revenues of $435 billion and EPS of $3.75. Barely 10% growth of earnings and less than 10% growth of revenues. With the stock trading at a 13 PE multiple of fiscal year 2009, many would say the shares are more than fairly valued. In a difficult market as we have experienced, Wal-Mart became a safe place to hide money. The shares are up 14% this year which is outstanding performance vis a vis the rest of the market.

Wal-Mart may trade up to the $53-55 level before the year is finished, but as I mentioned it is not the best long term story in the big box retail segment. If the economy improves in the second half of the year, consumers may begin to "shop up" again, which would leave Wal-Mart with its traditional shopping base. That base is not enough to propel strong same store sales which is the life blood of big box retailers.

Georges Yared write about great growth stocks today in Game On Investing