NEW YORK — Retail stock prices gained ground for a second straight week as falling oil prices, a brighter jobs picture, stronger same-store sales in October and the reelection of President Bush inspired Wall Street to invest in the sector.
In turn, the WWD Composite Stock Index ended last week up 4.7 percent to 1170.19. The index outpaced the S&P 500, which jumped 3.2 percent to 1166.17.
Interestingly, one of the strongest retail performers last week didn’t gain on an improving consumer spending outlook. Instead, shares of the retailer Sears Roebuck & Co. swelled on its real estate position.
In Friday trading, Sears surged after real estate investment trust Vornado Reality Trust disclosed in a Form 10-Q filing with the Securities and Exchange Commission that it owns a 4.3 percent stake in Sears common stock, which it called an “economic interest.” Shares of Sears were subsequently upgraded by Goldman Sachs.
Vornado said it acquired 7.9 million Sears common shares in August and September through a series of privately negotiated transactions with an unnamed financial institution. It then purchased a call option and simultaneously sold a put option at the same strike price on Sears shares with a weighted-average strike price of $39.82 a share, or about $315.2 million.
Based on the Nov. 4 closing price of Sears shares at $37.18, the market value of the 7.9 million shares underlying the option agreements was about $294.4 million.
Shares of Sears closed Friday up 31.1 percent to $45.88 from the prior week’s $35.
“Vornado’s ultimate intentions remain unclear, but if it does seek to extract value via an asset maximization strategy, Sears’ share price performance is likely to be dictated by factors that are difficult for fundamental retail analysts to forecast,” said Goldman Sachs analyst George Strachan in a Friday research report in which he upgraded shares of Sears to in-line from underperform.
This story first appeared in the November 8, 2004 issue of WWD. Subscribe Today.