By  on August 3, 2009

Retail stocks more than held their own last month, outpacing the market and rising 9.9 percent, but the sector still faces slowing consumer spending and rising unemployment.

The S&P Retail Index advanced 32.08 points for the month to 354.63, as the Dow Jones Industrial Average increased 8.6 percent, or 724.61 points, to 9,171.61.

Among the retail gainers in July were AnnTaylor Stores Corp., up 51.3 percent to $12.07; Nordstrom Inc., 32.9 percent to $26.44; Macy’s Inc., 18.3 percent to $13.91; Tiffany & Co., 17.6 percent to $29.83; Saks Inc., 15.6 percent to $5.12; Urban Outfitters Inc., 15.1 percent to $24.04; Kohl’s Corp., 13.6 percent to $48.55, and Abercrombie & Fitch Co., 12.6 percent to $28.59.

Even as the economy has appeared to stabilize with the slowed pace of declines, consumer spending weakened.

Gross domestic product fell at an annual rate of 1 percent for the April-June quarter, after a drop of 6.4 percent for January-March, according to advance figures from the Commerce Department Friday.

“The U.S. economy is at — or very near — the bottom of the deepest recession of the postwar period,” said Nariman Behravesh, chief economist at IHS Global Insight, in an analysis. “We expect real GDP growth in [the third quarter] to be a small positive. However, the early phases of the recovery are likely to be quite weak.”

The government said personal consumption expenditures dropped 1.2 percent in the second quarter after rising 0.6 percent in the first quarter.

Bart Van Ark, chief economist of The Conference Board, said the U.S. has a long way to go.

“Consumer spending came out worse than expected and is likely to remain weak into the third quarter because of ongoing clogging in income and credit channels,” Van Ark said. “With capital spending still falling and unemployment rising, neither investors nor workers are likely to see strong rewards anytime soon.”

Unemployment is at a 26-year high of 9.5 percent and is expected to keep rising when the Labor Department reports on July employment Friday. Investors also will get a look at retailers’ most recent results this week when major chains report monthly comparable-store sales on Thursday.

“Cool weather in the beginning of July likely hurt sales of summer clearance merchandise, but continued cool weather near month-end and early back-to-school promotions may have spurred sales late in July,” said Citigroup analyst Deborah Weinswig.

But the picture could start to brighten going forward, especially since retailers will be up against year-ago results, when the stock market was melting down as the financial crisis moved into high gear. Also, retailers have worked hard to get supply in-line with demand and cut inventories, which could help them ride out the economic turmoil.

Last week, retail stocks inched up 0.9 percent and 118 of the 175 stocks tracked by WWD rose, four were unchanged and 53 declined.

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