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Retail Stocks Rise 1.1% for Week

J. Crew, Guess outperform competitors in a lackluster quarter for retailers.

For most retailers, the arduous task of reporting second-quarter results has come and gone and, as expected, the picture they painted wasn’t pretty.

But the few last week who could lay claim to some sort of good news, or hint there was good news coming, were rewarded by investors. Their gains stood out in a week when the S&P Retail Index inched up 1.1 percent to 370.35 and the Dow Jones Industrial Average advanced 0.4 percent to 9,544.20.

Shares of Guess Inc. shot up 16 percent to $35.46 for the week as second-quarter earnings rose 10.6 percent.

“We definitely feel that conditions have stabilized in a number of ways, but that doesn’t mean the crisis is over and there is no doubt there are challenges ahead,” said Paul Marciano, chief executive officer.

At J. Crew Group Inc., a slight rise in profits helped push its stock up 10.3 percent to $34.73. Millard “Mickey” Drexler, chairman and ceo, also saw signs of improvement and said the downturn has had its benefits. “There’s nothing like a good old-fashioned recession to make you run a better business,” he said.

Chico’s FAS Inc.’s net income more than doubled on sales gains and the retailer’s stock rose 8.4 percent to $13.11. And Coldwater Creek Inc. posted a loss, but said it was ready to ramp up spending on marketing and inventory to drive sales. Investors pushed the stock up 10.3 percent last week to $7.69.

Of 172 stocks tracked by WWD, 117 were up for the week, 8 were flat and 47 were down.

Friday also brought fresh signs that the economy could be headed toward better days.

The Economic Cycle Research Institute said the four-week moving average growth rate of its Weekly Leading Index hit a 38-year high of 19.6 percent. The index had a modest dip for the week ended Aug. 21.

Lakshman Achuthan, the forecasting firm’s managing director, said the index’s continuing surge meant “a double dip back into recession in the fourth quarter is simply out of the question.”

But the next few years could still be trying ones for retailers.

Charles McMillion, president and chief economist at MBG Information Services, said the recession might be nearing an end, but that the recovery could be “weak and fragile” without additional government intervention.

The Commerce Department reported that July disposable personal income held steady from June and McMillion noted the measure fell 0.2 percent on an inflation-adjusted-per-capita basis. Personal consumption expenditures rose 0.2 percent in July.

But McMillion said the record $13.9 trillion decline in household wealth from the second quarter of 2007 through the first quarter of this year would continue to weigh on spending.

“I do not expect total…household net worth to return to constant dollar 2007 levels until 2015 or later suggesting that the sluggish growth in spending may persist for many years,” McMillion said.