NEW YORK — Oil prices continued to wreak havoc on retail and vendor shares last week, with oil topping $56 a barrel in trading on Friday. The Neiman Marcus Group being put on the auction block, and speculation of Sears, Roebuck & Co. selling Lands’ End, only added to the uncertainty.
With little positive news to bolster confidence the WWD Composite Stock Index declined 1.6 percent over the week to close at 1,141.98. The S&P 500 fared a bit better, giving up 0.9 percent to close at 1,189.61.
However, both the WWD Index and the S&P have shown improvements for the year-to-date period. Since Jan. 2, the WWD Index has risen 2.2 percent while the S&P advanced 7.3 percent.
According to Sanford C. Bernstein & Co. analyst Emme Kozloff, much of this improvement can be attributed to tax cuts, early tax refunds and low interest rates. Unfortunately, Kozloff believes those stimuli have run their course and that there are warnings that the retail sector could experience declines for the remainder of the year.
On the positive side, said Kozloff in a research report released on Thursday, wages and growth are still on the rise. “The current level of [approximately] 5 percent wage growth and [approximately] 1.7 percent payroll growth should allow for consumer spending growth in the 4 percent to 5 percent range this year,” said Kozloff. However, rising interest rates and gas prices could hinder low-income consumers.
Kozloff also believes strong comparable-store sales figures reported over the last several months have been the result of early tax rebates. “Refunds are disproportionately skewed toward early filers and lower-income earners,” said Kozloff, who expects the influx from rebates to have run their course by the end of the second quarter.
“With rising rates, high gas prices and difficult comparisons, we remain neutral to moderately negative in our outlook for the sector in fiscal 2005,” concluded Kozloff.
WWD COMPOSITE STOCK INDEX VS. S&P 500
This story first appeared in the March 21, 2005 issue of WWD. Subscribe Today.