Retail stocks sobered up Friday, a day after better than expected June same-store sales spurred a rally that prompted the broader markets to post record gains. The results bettered Wall Street's low expectations based on consumer spending concerns because of high gas prices and a slowdown in the housing market.
The S&P Retail Index ended the trading week up at 528.54, rising 0.29 percent.
The U.S. Department of Commerce on Friday said June retail and food sales fell to $373.9 billion, down 0.9 percent from May, but up 3.8 percent from the year-earlier period.
"We view [Thursday's] strength in retail equities as more of a temporary rally than the beginning of a more constructive move, given the high degree of pessimism that had been built into expectations," Jefferies & Co. Inc. analyst Timothy Allen wrote in a research note. "While the backdrop for equities in general remains favorable, we see a greater probability of disappointing consumer-related data in coming months."
Allen noted that while retailers are reporting "pockets of strength," the general outlook for July same-store sales remains mixed because of the recent rise in interest rates, a more stringent lending environment and the housing market's correction.
But Telsey Advisory Group's Dana Telsey painted a more optimistic picture for the July comps period, citing "healthy" June results and expected strength in fall merchandise, both of which she said had tempered concerns for now.
"Retailers should benefit from the calendar shift resulting from the 53rd week last year, 23 tax-free days versus eight last year, and a mix of wear-now and new back-to-school product," Telsey wrote in a note.
Citigroup analyst Deborah Weinswig also pointed to the calendar shift to support her expectation that July will be a "very strong month."
"Specifically, retailers had a week of clearance moving into June and will have a week of back-to-school moving into July," Weinswig wrote.
But Jefferies' Allen warned that potential erosion in consumer-relevant data might take several months to be felt.
"A year ago, when interest rates on 10-year bonds and 30-year mortgages rose to similar levels as today during the April/June time frame, the negative affect was not fully seen until a few months later," said Allen, who noted that weakness in housing turnover, as well as consumer spending and confidence, was seen in June following peak rates.Bear Stearns analyst Randal Konik listed five reasons to avoid shares of Urban Outfitters Inc.: business model concerns, unrealistic long-term growth and margin expectations, near-term earnings risk, overly positive analyst sentiment and valuation. "Despite being down 20 percent in the past 45 days, we think there is still room for another 20 percent correction," wrote Konik.
At Susquehanna Financial Group, analyst Thomas Filandro noted that negative traffic continued to hamper Gap Inc.'s performance and wrote that with no fall TV advertising campaign planned at the Gap division, "we remain concerned that shopper traffic will remain muted."
Robert W. Baird & Co. analyst Mitch Kummetz noted that Pacific Sunwear of California Inc. was on track to report mid-single-digit comps for the quarter after good, but promotion-driven, June same-store sales numbers. "We don't doubt that the company's business is getting better, but the shares aren't inexpensive unless there is a lot of upside to the numbers, which we don't happen to believe to be the case," Kummetz wrote.
@tradesy is turning the concept of a showroom upside down with its new space in Santa Monica. Here, the company plans to hold events, art exhibits and a showcase rare fashion pieces like this Louis Vuitton boxing set. Get all the details on Tradesy’s first showroom on WWD.com. #wwdnews
Spotted last night at the @erdem x @hm launch event: Kate Bosworth, Rashida Jones, Kirsten Dunst and Selma Blair. The party, which took place in LA, also marked the opening of their pop-up shop. “I was interested in creating a collection that wasn’t in any way disposable. It was about pieces you’d create and keep forever, things that have a permanence to it,” designer Erdem Moralioglu said. #wwdeye (📷: Katie Jones)
Renee Zellweger in yellow in 2001 and again in 2017. Chosen as one of the 12 @pantone Leading Spring Colors (and dubbed “Meadowlark”), it only makes sense that the bright hue stands the test of time and is making a resurgence this season, seen already on stars like @blakelively and @gigihadid. (📷: Donato Sardello & @rexfeatures) #wwdfashion #tbt
Dior’s 70th anniversary celebration continues with a new exhibition at the Royal Ontario Museum in Toronto. “Christian Dior,” which is scheduled to run through March 18, takes a look at the founders tenure from 1947 to 1057 and feature 40 designs. Pictured here is an evening gown from the Ailée, fall 1948-49 haute couture collection. #wwdfashion (📷: Brian Boyle)
As one of the most recognizable models in the world, Christy Turlington Burns has an insider’s view of the fashion industry and the allegations of sexual harassment swirling around it. “I can say that harassment and mistreatment have always been widely known and tolerated in the industry. The industry is surrounded by predators who thrive on the constant rejection and loneliness so many of us have experiences at some point in our careers,” Turlington told WWD, along with her suggestions for how the modeling world should protect younger women and men. Read more on WWD.com. Link in bio. (📷: Tony Palmieri) #wwdnews
@asics America has tapped a new brand ambassador: famed DJ/record producer @steveaoki. This initiative is intended to set the tone for the new brand identity and philosophy and will include partnerships with influencers and in-store and off-line activations that will continue into next year. This is Asics’ most significant marketing effort in two decades, and is expected to attract younger consumers to the brand. #wwdfashion
24-year-old Jean Prounis is redefining the rules of jewelry. Formerly a studio assistant to Jemima Kirke and a design apprentice at Ghuran, she focuses on handcrafted subtleties and ancient goldsmithing techniques. “There was a really sterile feel in the environment and I wanted to have jewelry with character that shapes how you wear it everyday,” Prounis said. Each piece is hand made in New York, either by Prounis or three other jewelers in the district. #wwdfashion
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews