UBS put a sell rating on J.C. Penney Co. Inc.’s stock and prompted an investor retreat that weighed on retail shares, but didn’t prevent the sector from posting a gain today.
The S&P Retail Index inched up 0.3 percent, or 1.80 points, to 668.32, and the Dow Jones Industrial Average rose 0.1 percent, or 17.21 points, to 13,488.43.
Penney’s was the worst-performing stock in the retail index and fell 4.7 percent to. Despite all the selling on Wall Street, actual “sell” recommendations from analysts are rare.
Michael Binetti, the UBS analyst who previously rated Penney’s stock as neutral, said: “A deteriorating earnings outlook and emerging signs of cash flow distress will require significant changes to [Penney’s] turnaround strategy.”
Binetti said Penney’s is still repairable, but noted the chain “has a serious legacy real estate disadvantage — with as many as 400 of its 1,100 stores in ‘B’ and ‘C’ locations that will garner little investment from property owners who are increasing their focus on investment in their ‘A’ properties to combat the increasing threat of e-commerce in coming years. We think [Penney’s] will have to make hard decisions about significant store count reductions.”
Among fashion’s gainers on Wall Street were Coach Inc., up 2.4 percent to $58.89; Guess Inc., 2.2 percent to $26.56; Michael Kors Holdings Ltd., 1.8 percent to $52.94, and Gap Inc., 1.2 percent to $31.71.
European markets closed slightly for the day, with the FTSE 100 in London and the FTSE MIB in Milan both ahead 0.1 percent, to 6,121.58 and 17,502.39, respectively. The CAC 40 in Paris and the DAX in Frankfurt both grew 0.3 percent, to 3706.02 and 7,715.53, respectively.
The pound was trading at $1.61 against the dollar, while the euro was getting $1.31.
Retail and luxury stocks were mostly ahead, with the day’s strongest gainers including, Mulberry, up 1.7 percent to 12.62 pounds; Luxottica, 1.3 percent to 32.54 euros; and Ferragamo, 0.9 percent to 17.78 euros.
Stocks losing ground included Swatch, down 0.5 percent to 84.95 euros, and Brunello Cucinelli, which dipped 0.2 percent to 14.16 euros.