NEW YORK — Investors kept up their retreat from retail and apparel stocks last week despite a brighter jobs outlook — hiring hit a five-year high, the government said Friday — and better-than-expected same-store sales for December.
As a result, the WWD Composite Stock Index dropped 1.5 percent to 1153.61 on Friday from 1170.75 the prior week while the S&P 500 dropped 2.3 percent to 1186.19.
Based on the broad pullout from the retail sector over the course of the week, it seemed investors were cautious as more difficult year-over-year sales and earnings comparisons loom on the horizon.
Shares of Gap Inc. fell 3.5 percent for the week, closing Friday at $20.72. Mark Montagna, equity analyst at Wells Fargo, said he was maintaining a “hold” rating on the stock.
The analyst reduced his earnings per share estimate for fiscal 2005 to $1.30 from a prior forecast of $1.32.
“We continue to believe the spring transitional merchandise has missed the mark at all three divisions,” Montagna said in his research note. “In our recent store visits, we found the spring transitional assortments at Gap, Old Navy and Banana Republic to be quite poor. We think it is bland, and lacks an appealing color palette.”
He went on to say that the “parallels between our observations from store visits and the December performance are making us even more concerned about the prospects for earnings in [the first half].” Comps at Gap’s U.S. stores showed a gain of 2 percent.
In turn, Montagna lowered his first quarter EPS estimate for Gap to 31 cents.
Meanwhile, shares of Target Corp. fell 5.9 percent for the week, closing Friday at $49.02.
Earlier in the day, Fitch Ratings upgraded Target’s senior unsecured notes to “A-plus” from “A,” and said the ratings outlook was stable.
“The upgrade reflects Target’s solid operating performance in a challenging environment and a substantially improved financial profile following the sale of Mervyn’s and Marshall Field’s,” the ratings firm said in a statement. “The rating also considers positive trends within Target’s credit business and the company’s strong real estate ownership position, as well as the competitive nature of discount retailing.
WWD Composite Stock Index vs. S&P 500