The Dow Jones Industrial Average closed above 10,000 Wednesday — retaking ground first gained in 1999 but not seen since last October — as September sales at specialty and department stores rose and investors got a positive feeling about third-quarter profits in the banking and technology sectors.
This story first appeared in the October 15, 2009 issue of WWD. Subscribe Today.
Retail stocks flirted with their own milestone, but the S&P Retail Index narrowly missed the 400 mark, advancing 1.7 percent, or 6.66 points, to 397.89. Among the leaders of the fashion pack were Liz Claiborne Inc., up 11.5 percent to $7.45; Zale Corp., 9.7 percent to $7.67, and Macy’s Inc., 5 percent to $20.72.
The Dow rose 1.5 percent, or 144.80 points, to 10,015.86 after two of its components, JPMorgan Chase & Co. and Intel Corp., posted combined third-quarter profits of almost $5.5 billion.
But even if sales were better last month than in August for apparel merchants, they were still worse than a year earlier and economists said stores have a long slog ahead of them.
“Retail is not out of the woods yet, but consumers felt comfortable enough last month to spend on more than just necessities,” said Rosalind Wells, chief economist with the National Retail Federation.
September specialty store sales increased 0.5 percent compared with August, but fell 1.3 percent to $17.48 billion from a year earlier, said the Commerce Department. Sales at department stores advanced 0.4 percent month-to-month, but declined from August 2008, dropping 3.7 percent to $15.66 billion.
“It’s feeling like ‘Groundhog Day’ for me every month,” said Kevin Regan, senior managing director and retail industry expert with FTI Consulting. “We’re all looking for that green shoot, if you will, and I really don’t see it.”
Until consumer confidence improves dramatically, there’s unlikely to be a significant recovery, Regan said.
Overall retail and food service sales fell 1.5 percent in September, beating consensus expectations of a 2.1 percent drop for the month. Compared with a year earlier, sales fell 5.7 percent to $344.7 billion. The discontinuation of the cash-for-clunkers auto incentive program hurt sales last month.
It’s been a remarkable comeback for the Dow, which bottomed out at 6,440.08 on March 9 after bank failures, the bursting of the housing and credit bubbles and the recession erased more than half the value of equity holdings. The retail index hit its nadir of 207.49 on Nov. 21.
The rebound has helped strengthen the still-tenuous credit markets, said Rosemary Sisson, analyst and director at Knight Libertas.
“If the equity markets are feeling good, we should be even better because we’re further up the capital structure than they are,” Sisson said, summing up the sentiment of debt investors. But junk-rated retailers might still have to tough out this holiday season with the funding they have in place, given the time of year and cautious lending practices.
“You have to get through Christmas at this point, show where you are in March and then you can come to the market,” Sisson said. “I can’t imagine that anybody in front of this Christmas is going to be able to do a significant refinancing.”