By  on July 7, 2005

NEW YORK — After rallying behind Wal-Mart Stores Inc. with its better-than-expected sales gain for June, shares in the retail sector took it on the chin Wednesday as oil reached a record $61 a barrel.

Along with other major indices, the S&P Retail Index fell 0.85 percent at the bell to 446.32, while shares of Wal-Mart closed down 0.8 percent to $49.38. On Tuesday, Wal-Mart shares jumped 3.15 percent to $49.80 after the world's largest retailer said June same-store sales would show a gain of 4.5 percent, which is ahead of the company's previous forecast of a 2 to 4 percent gain.

On Tuesday, investors read the improved sales results at bellwether Wal-Mart as a sign that consumers were back to their spending ways despite rising fuel prices. But as crude oil topped $61 a barrel on Wednesday, investor jitters returned.

Still, analysts remained bullish on June comps, most of which are released today. In several previews, analysts called for the teen apparel retailers and the luxury channel to do well. Indeed, American Eagle Outfitters Inc. said after the market closed that June comps gained 28 percent.

Deborah Weinswig, equity analyst at Citigroup Smith Barney, said in a preview note that the high-end department stores "such as Neiman Marcus, Nordstrom and Saks Fifth Avenue are still likely to outperform the moderate and traditional department stores, consistent with recent trends and a testament to the resilience of the luxury consumer and the fashion cycle."

Bernstein Research analyst Emme Kozloff echoed that sentiment in a note Wednesday, saying that "June experienced more seasonable temperatures [than May] with heat waves hitting pockets of the country. In terms of the subsectors, we expect the teen retailers to be standouts followed by high-end retailers."

The Bernstein analyst said gas prices at the pump this June "averaged $2.20, which is flat to last month [this includes the 4 percent increase in the past two weeks] and 9 percent higher than last year. Given the lag in pump prices versus oil prices, we will be monitoring this trend closely."

David Cumberland, analyst at Baird's U.S. Equity Research unit, said in his report that "gas prices have increased 19 percent on a trailing 12-month basis [through June 27], indicating sustained pressure on consumer spending."In a Legg Mason consumer spending survey and report, gas prices "had a more severe impact on consumer spending-budgeting, as 'significant' impact responses rose nearly 400 basis points." The survey also found that two-thirds of consumers indicated there would be at least "some" impact on spending-budgeting due to higher fuel prices.

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