By  on January 8, 2009

Signs of continued weakening in the job market ended a five-day retail stocks rally and helped push down shares in the sector 2.9 percent.

The Standard & Poor’s Retail Index lost 8.83 points to close at 292.79 on Wednesday after rising 12.2 percent in the five prior trading sessions. The Dow Jones Industrial Average slid 2.7 percent, or 245.40 points, to 8,769.70 after aluminum giant Aloca Inc. said it would lay off 13,500 workers to trim costs.

Economists mark employment as the most important factor underlying consumer spending — people who are worried about their next paycheck simply spend as little as possible.

Businesses cut a seasonally adjusted 693,000 jobs last month, according to the ADP National Employment Report released Wednesday.

Companies with more than 500 workers shed 91,000 positions, firms with 50 to 499 workers cut 312,000 jobs and businesses with fewer than 50 employees reduced payrolls by 281,000. Investors will get another look at the nation’s payrolls, including government jobs, when the Labor Department releases its monthly jobs report Friday.

Fashion companies have also trimmed headcounts as they look to control costs.

Perry Ellis International Inc. said Tuesday afternoon it would forgo management bonuses and had found another $5 million in annual savings, primarily though layoffs and cuts in corporate expenses.

Perry Ellis shares fell 16.5 percent to $5.42 after the company warned that earnings for the year ending Jan. 31 would total 55 to 65 cents a diluted share on expected revenues of $860 million to $870 million. In November, the firm projected profits of 90 cents to $1.10 a diluted share on revenues of $875 million to $900 million, below an earlier forecast.

The men’s and women’s apparel vendor attributed the bottom-line reduction to a “significant increase in markdowns and sales allowances for the holiday season” as well as retail requests that spring deliveries be delayed 30 to 60 days.

Department stores have used their clout to try to win concessions from their vendors as sales weakened over the holiday season. Major stores will make clear how bad the holiday season was when they report same-stores sales today.

Firms with broader customer bases might fare better than their more targeted counterparts.

“Our observations suggest that there is generational overlap in the most popular stores and while they are affected by heavy discounting in the marketplace, those more popular destinations seem to attract significant and highly noticeable traffic when they offer great promotions,” said Jennifer Black, equity analyst and president of her namesake firm.

Black said Gap and J. Crew each had compelling shopping experiences and customers from overlapping demographic groups. “These two companies offer merchandise that targets individuality, as well as value,” she said. “This could be the new ‘chic’ in these economic times.”

Still, shares of both of those companies fell Wednesday.

J. Crew Group Inc.’s stock dropped 10.4 percent to $11.69, and Gap Inc. was down 4.8 percent to $13.56.

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