Retail Stocks Hit New Post-Recession Highs

Sourcing costs still looming over the sector.

Retail stocks hit fresh multiyear highs Tuesday as investors fostered hopes that the consumer resurgence seen in January would continue.

This story first appeared in the February 9, 2011 issue of WWD.  Subscribe Today.

The S&P Retail Index jumped 1.5 percent, or 7.6 points, to 517.13 — its best close since July 2007. The Dow Jones Industrial Average increased 0.6 percent, or 71.52 points, to 12,233.15, a level not seen since June 2008.

Retail gainers included Urban Outfitters Inc., up 5.6 percent to $37.06; J.C. Penney Co. Inc., 4.9 percent to $35.03; Chico’s FAS Inc., 4.2 percent to $11.95, and Dillard’s Inc., 3.9 percent to $42.04. Vendors also picked up steam, and among those logging new 52-week highs were Under Armour Inc., which closed up 2.3 percent to $66.99; Fossil Inc., 2.2 percent to $78.21, and Polo Ralph Lauren Corp., 1.7 percent to $115.77.

Fast-food giant McDonald’s Corp. helped spark the consumer-based rally with a 5.3 percent gain in global comparable-store sales. Consumers have shown signs of increased confidence and expanded credit card debt for the first time in 27 months in December, according to a Federal Reserve report issued Monday.

Additionally, the International Council of Shopping Centers and Goldman Sachs said chain store sales increased 2.2 percent during the week ended Feb. 5 and were up 2.5 percent on a year-over-year basis. The challenges of winter weather woes notwithstanding, “retailers were able to post a solid sales increase for the first time in four weeks,” said ICSC chief economist Michael Niemira.

Despite the new high, Amy Noblin, an analyst at Weeden & Co., said concerns about increased sourcing costs and tough comparisons with last year have taken their toll on retail stocks, which are lagging the overall market in 2011.

“It’s going to be hard for anyone to step in with any conviction on this group until we get through earnings season,” she said. “The sourcing commentary is not good. Most people think that costs in the back half of the year can be up 10 to 15 percent, potentially even higher.”