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The big kids have come out to play in retail.
This story first appeared in the October 25, 2010 issue of WWD. Subscribe Today.
The sector might be far from its November 2008 nadir, when retail stocks could be had for a song, and the S&P Retail Index might now be up 14.2 percent for the year, but some deep-pocketed investors have decided that the time is right to put some serious money to work. They might think that the recovery, as slow and jittery as it’s been, finally seems real enough to start betting on the consumer again — or at least dig in and push their new holdings to rework operations.
Last week, Italian business tycoon Diego Della Valle became Saks Inc.’s biggest stockholder, boosting his share of the retailer to 19.1 percent while noting he could seek board representation. Earlier this month, activist investor William Ackman, of Pershing Square Capital Management, and Vornado Realty Trust together snatched up 26.4 percent of J.C. Penney Co. Inc. They are expected to pressure the midline retailer to revamp operations.
Saks’ stock shot up 9 percent last week to $10.73, while Penney’s gave back some of its Ackman-related gain and slipped 3.9 percent to $32.55. Penney’s also instituted a poison pill that makes it virtually impossible to take over the company without the board’s approval.
The S&P Retail Index inched up 0.5 percent for the week to 469.37 and, with its double-digit increase for the year, is 126 percent above its recession low.
The week wasn’t kind to two misses’ retailers struggling to get their merchandising right. Of the 171 issues tracked by WWD, none fell further than Coldwater Creek Inc., down 36.3 percent for the week to $3.48, after disclosing Monday that it expected a loss of 14 cents to 19 cents a share in the third quarter versus earlier expectations of a small profit. It’s also expecting a drop of between 18 percent and 21 percent in its same-store sales.
The third-largest decline for the week was from Christopher & Banks Corp., which said Tuesday that Lorna Nagler had resigned as president and chief executive officer “to pursue other interests.” It reported a larger second-quarter loss than analysts expected on Sept. 30 as a weak fall assortment led to higher promotional levels and pressure on its gross margins.
All told, 63 of the stocks followed by WWD were ahead for the week, while 106 lost ground and two were flat.
The Dow Jones Industrial Average rose 0.6 percent for the week, ending at 11,132.56. Before rebounding late in the week, blue-chip stocks closed below 11,000 on Tuesday on worries that higher interest rates in China could hurt the global recovery.
European markets rose for the week, with the DAX up 1.8 percent in Frankfurt, the CAC 40 ahead 1.1 percent in Paris and the FTSE 100 advancing 0.7 percent in London.
Asian markets headed down, with the Hang Seng Index falling 1 percent in Hong Kong and the Nikkei 225 slipping 0.8 percent in Tokyo.