NEW YORK — Record high gas prices and a whirlwind of speculation regarding the potential sales or acquisitions of some of the biggest nameplates in retail pushed industry stocks into their fourth week of declines.
The WWD Composite Stock Index fell 1.1 percent over the week to close at 1117.2 from 1130.18 the prior week. The S&P 500 posted marginal gains, rising 0.1 percent to close at 1172.92.
Shares of J.C. Penney shot up 8.7 percent over the week to close at $50.04 a share on Friday, from $46.04 on March 24.
Shares of the newly merged Sears Holdings Corp. enjoyed their first full week of trading on the Nasdaq National Market. Shares of Sears rose 3.3 percent to close at $135.39 a share from a Monday close of $131.11 a share.
In a March 28 research report initiating coverage on Sears, Lehman Brothers analyst Robert Drbul said despite the fact that tangible retail gains are likely several years out, the company should remain attractive to investors.
“With over $55 billion in annual revenues and nearly 3,500 store locations, Sears Holdings Corp. [SHLD] is the third largest broadline retailer in the United States,” said Drbul. “While we do not expect the stock to trade on retail fundamentals over the near term, there are several catalysts for the shares including management hires, business divestitures, real estate divestitures and possibly other acquisitions.”
However, falling consumer confidence and a dim view of the future could pose problems for many retailers heading into the spring and summer seasons. According to a March 29 report by Dennis Jacobe with the Gallup News Service, Gallup’s Index of Investor Optimism fell 9.8 percent to 74 in March compared with 82 in February.
A Gallup poll of 1,001 U.S. adults conducted between March 21 and March 23 revealed that the effect of rising gas prices is having a dramatic affect on consumers.
According to Gallup, 39 percent of investors say higher gas prices are putting a strain on their household’s financial situation. “There has been a sharp increase in the percentage of investors who feel today’s higher energy prices are likely to be permanent,” said Jacobe. According to the poll, 77 percent of respondents believe the rising gas prices will be permanent, compared with just 56 percent in May 2004. “This change in perspective suggests that many consumers may begin adjusting their buying preferences, as well as their overall spending, with an eye toward a long-term decrease in the level of their disposable income.”
This story first appeared in the April 4, 2005 issue of WWD. Subscribe Today.