Retail Stocks Down 3.6 Percent Last Week

Retail stocks were down last week, but analysts says the worst could be over for retailers based on previous recessionary patterns.

Retail stocks found a measure of redemption Friday, rising 1.2 percent, but the sector lost ground for the week as the rally that began in March continued to sputter.

This story first appeared in the June 22, 2009 issue of WWD.  Subscribe Today.

The S&P Retail Index inched up 3.66 points to 320.07 for the day, but dipped 3.6 percent for the week. The Dow Jones Industrial Average fell 0.2 percent, or 15.87 points, to 8,539.73 on Friday and declined 2.9 percent for the week.

Retail stocks are up 43.4 percent since March 6 when economic data began suggesting the economy was still worsening but no longer in free fall. So far, there have not been enough signs of actual improvement to keep feeding the rally. Unemployment stands at 9.4 percent and is expected to hit 10 percent.

If history repeats itself and retail stocks hold true to their “early cycle” trend, the sector might continue to rise as unemployment bottoms out and eventually improves.

Charles Grom, a J.P. Morgan equity analyst, examined the last five recessionary periods and said the worst could have already passed for retailers.

“If our academic analysis holds true and the 10 percent peak-unemployment forecast is accurate, it implies retail stocks should have bottomed out in [the first quarter] with unemployment in the mid-7 percent range,” Grom said in a research note. “It’s very possible that we’ve seen the bottom for retail stocks.”

On Friday, bankrupt Anchor Blue said it would close 46 underperforming stores as part of a restructuring plan following a May Chapter 11 filing.

Shares of Liz Claiborne Inc. fell 29.2 percent last week to $3.28 after the company said second-quarter losses would be steeper than analysts expected. Conversely, The Talbots Inc. was up 38.9 percent to $6.96 and Syms rose 9.4 percent after closing its purchase of Filene’s.