Debt downgrades for luxury retailers Nordstrom Inc., Neiman Marcus Inc. and Saks Inc. failed to blunt a leap on Tuesday in retail stocks, which posted their second-largest gain this year and their fifth advance in six sessions. Retail shares rose 5.4 percent and outpaced the broader market amid hints of stability in parts of a consumer economy in general free fall.
The S&P Retail Index perked up 13.74 points to 269.34, 17.7 percent above its March 9 level of 228.76. The Dow Jones Industrial Average rose a milder 2.5 percent, or 178.73 points, to 7,395.70.
Market research from The NPD Group Inc. showed evidence of stabilization in consumers’ feelings about job security — still not good, but not getting worse — and government figures showed February housing starts rose a seasonally adjusted 22.2 percent compared with January.
But for every hint of stability there seemed to be several pieces of bad news, from signs of trouble in consumer credit card payments to debt downgrades. Moody’s Investors Service reduced its debt ratings forNordstrom’s, Neiman Marcus and Saks and gave ratings for all three companies a negative outlook. Nordstrom’s senior unsecured rating was cut to “Baa2” from “Baa1.”
“The downgrade reflects our expectation that Nordstrom’s operating results will continue to be negatively impacted by the current recession and downturn in consumer spending, and are unlikely to return to their pre-recession levels over the next 18 to 24 months,” Moody’s said.
Neiman’s probability of default and corporate family ratings were both moved to “Caa1” from “B1,” and Saks’ probability of default rating was cut to “B3” from “B1,” and its corporate family rating to “B2” from “B1.”
In other rating action, Standard & Poor’s downgraded Quiksilver Inc.’s corporate credit rating to “B-minus” from “B-plus” and placed the rating on CreditWatch with developing implications, meaning the rating could be raised or lowered after a review. Quiksilver is exploring a range of strategic and financing options to improve its liquidity.
The bump in retail stocks might ultimately say more about how far they’ve fallen, down 36.9 percent from their 52-week highs, than how long it will be before the economy turns around.
“Generally, the retail stocks are relatively inexpensive versus a historical context,” said Tom Chin, managing director of consulting and analytics at Telsey Advisory Group. “There’s a lot of interest in those names that have declined significantly. These stocks have tremendous value and opportunity if it’s a business model that can sustain itself long-term.”
Chin pointed to J. Crew Group as an example of a company with a sustainable business model, low debt load and strong management team. The stock rose 5.8 percent to $11.33 Tuesday.
Other retail gainers included Charming Shoppes Inc., up 29.4 percent to $1.19; AnnTaylor Stores Corp., 15.9 percent to $3.93; Dillard’s Inc., 12.9 percent to $5.25; Destination Maternity Corp., 10.1 percent to $5.03; Bebe Stores Inc., 9.8 percent to $5.38; New York & Co. Inc., 9.5 percent to $2.65; Urban Outfitters Inc., 8.3 percent to $18.16; Macy’s Inc., 5.6 percent to $8.35; Kohl’s Corp., 6.2 percent to $39.70; Target Corp., 5.6 percent to $30.45; Nordstrom, 4.5 percent to $15.71, and Saks, 4.4 percent to $1.90.
But business could still be a tough slog for some time in retail.
“From an operational perspective, I think the companies will still be challenged by personal consumption because of the unemployment overhang that’s out there,” Chin said.
The NPD survey found 34 percent of consumers were “very concerned” about their job security or income in February, down from 36 percent in January and 38 percent in December.
“While I think it’s premature to talk ‘recovery,’ I think if we are able to spot signs of stabilization, we’ll be better positioned for recovery and then the return to growth,” said Marshal Cohen, NPD’s chief industry analyst.
But NPD’s research also showed consumer attitudes toward the economy last month were at their lowest point since October. The firm’s Retail Response Indicator, which measures consumer spending intentions, fell to 35.4 in February, down from 37.6 percent in January and 37.1 percent in December.
Consumers are also still struggling to pay off their credit card debts. Credit card data from a number of companies suggests a continuation of rising delinquencies and charge-offs for issuers, said Charles Grom, equity analyst at J.P. Morgan, in a research note. Grom described Nordstrom’s February credit card performance as “disappointing,” with a 27 basis point increase in delinquencies to 4.07 percent and a 128 basis point rise in charge-offs to 8.71 percent. The analyst also said Target Corp.’s credit card portfolio would likely show rising delinquency and charge-off trends as well.
My character, Dinah Madani, is just the coolest, [most] badass woman imaginable," says @amberroserevah. The actress stars in @marvel's newest series on @netflix, @thepunisher. To prepare for her role, Revah sat down with Homeland agents to get a real sense of with Dinah's day-to-day life is really like. Read our full interview on WWD.com. #wwdeye (📷: @jilliansollazzo)
A scene from the 91st annual @macys Thanksgiving Day Parade. The parade, which boasts 50 million TV viewers and 3.5 million on-site spectators, is considered one of the largest and most watched parades in the world. (📷: Jason Szenes/EPA-REX)
The circus came to @bloomingdales 59th Street on Tuesday night and lit up Lexington Avenue with acrobatic dancers, death-defying knife throwing, sword swallowing and aerial acts with no net. The 45 minutes of theatrics built up to unveiling the holiday windows depicting @swarovski crystal-encrusted circus pieces and scenes from “The Greatest Showman” – songs from the soundtrack included. See the rest of the photos on WWD.com #wwdfashion (📷: Joshua Scott)
The psychedelic fashion that pervaded the ’60s is back with an exhibit at the @museumofcityny. “Mode New York: Fashion Takes a Trip” chronicles the changing styles from 1960 through 1973 and features designers such as @ysl, @oscardelarenta and more. The exhibition, which is on display through April 1, is organized into four periods: First Lady Fasion, Youthquake, New Bohemia and New Nonchalance. Pictured here is model Pat Bardonella during the Garvey Day Parade in 1968. (📷: @kwamebphoto) #wwdeye #wwdfashion
“People should be a lot more honest in expressing both the dark and light of themselves. We need to give each other the space to do that because it’s the only way we can grow and evolve,” says @noelwells of her new film “Mr. Roosevelt,” which is largely based on her own struggles. Unexpectedly leaving @nbcsnl in 2014 after just one season, Wells felt set back in her self-esteem and career trajectory. She quickly refocused her energy to more personal projects, which led to the completion of “Mr. Roosevelt.” Read the rest of WWD’s interview with the “Master of None” actress on WWD.com #wwdeye (📷: @jilliansollazzo)
@barbrastreisand is giving fans a chance to see her perform up close in a new concert series, which makes its debut on @Netflix today. From behind-the-scenes takes to her concert performance in Miami last December, the two-hour streaming special captures Streisand in her element. Pictured here is the singer/actress photographed for WWD in 1963. (📷: Palmieri Tony) #wwdeye #wwdarchive
@chanel and @pharrell dropped what’s being dubbed as the world’s most exclusive sneakers yesterday. The Adidas Originals NMD Hu, which Williams designed in collaboration with Chanel and @adidasoriginals, has a waiting list of over 120K people who pre-registered online at chanelatcolette.fr –– and only 500 pairs are on sale. The singer predicted the resale value of the shoes could reach $40K. Read the full interview on WWD.com. Link in bio. #wwdfashion (📷: Dominique Maître)
@imanshumpert is diving deeper into his creative endeavors and relaunching his clothing line, Post 90s, and is helping to raise money for the hurricane victims in St. Maarten with a jersey he’s designed with his brother. The Cleveland Cavaliers player talked to WWD about kneeling during the national anthem, working with fashion brands and how he wants to be more than an @nba player. Read the interview on WWD.com #wwdfashion (📷: George Chinese)