Investors pushed retail stocks down 5.9 percent Tuesday, focusing on what was happening — or not happening — in malls around the country rather than the swearing in of President Barack Obama on the National Mall in Washington.
The retail drop was the worst since Dec. 1 as the Standard & Poor’s Retail Index slid 16.51 points to 262.90 and analysts weighed in with fresh concerns about Polo Ralph Lauren Corp. and J.C. Penney Co. Inc. The Dow Jones Industrial Average sank 4 percent, or 332.13 points, to 7,949.09 on fears the banking sector might need even more cash to stay afloat.
Zale Corp. was hurt worse than most in the retail sector and its stock fell 17.7 percent to $2.37. After the market closed, Zale said its chief financial officer, Rodney Carter, had left the company. The post will be picked up on an interim basis by Cindy Gordon, senior vice president and controller.
As consumer weakness increasingly weighed on firms of all stripes, Polo was off 9.4 percent to $37.25 and J.C. Penney was down 9.8 percent to $17.42.
“While Ralph Lauren’s brand equity has typically enabled it to remain relatively unscathed in prior discounting periods, today’s shift from aspirational to desperational spending has likely impacted the brand,” said Adrianne Shapira, equity analyst at Goldman Sachs, in a research note.
“Ralph Lauren is the aspirational brand across every channel: Chaps and American Living in Kohl’s and J.C. Penney; Lauren and Polo in Macy’s and Bloomingdale’s, and Black Label in Saks and Neiman Marcus,” said Shapira, who downgraded the stock to “sell” from “neutral” and set a target price of $37.
Shapira noted Tiffany & Co., Coach Inc., Nordstrom Inc. and The Estée Lauder Cos. Inc. have all set the profitability bar lower and said she expected Polo’s third-quarter report on Feb. 4 to show signs of weakened fundamentals across its wholesale, retail, outlet and European businesses. On Tuesday, shares of Estée Lauder bucked the broader trend and inched up 1 cent to $26.12.
And anything having to do with credit is still stoking the interest, or fears, of investors.
J.C. Penney, in response to what it described as “unfounded market concerns” involving the retailer’s revolving credit facility, said the company has no debt coming due until March 2010 and it expects to have more than $2 billion in cash on Jan. 31, the end of the current fiscal year. The retailer also is in talks with its banks to modify or replace the credit facility expiring in April 2010.
“J.C. Penney has one of the strongest balance sheets in the retail industry and a cash position that is more than sufficient for all of our needs,” said the company. “Given this, there is no basis for any concern about our credit facility.”
Charles Grom, equity analyst at J.P. Morgan Chase & Co., raised warning flags that J.C. Penney could break covenants in its credit facility, which require, among other conditions, the maintenance of certain levels of debt-to-EBITDA (earnings before interest taxes depreciation and amortization).
Grom said an amendment to the facility would come at higher costs. He also reduced his fourth-quarter target for the company to earnings of 92 cents a share from 97 cents.
Other retailer decliners for the day included Saks Inc., down 15.8 percent to $2.83; Charming Shoppes Inc., 15.6 percent to $1.19; Macy’s Inc., 10.6 percent to $8.73; The Men’s Wearhouse Inc., 10.1 percent to $11.98; Hot Topic Inc., 9.4 percent to $8.31; American Eagle Outfitters Inc., 9.2 percent to $9.14; AnnTaylor Stores Corp., 8.2 percent to $4.62; Nordstrom Inc., 7.5 percent to $12.01; Target Corp., 7.1 percent to $32.55; Coach Inc., 6.7 percent to $15.87 and Tiffany & Co., 6.7 percent to $21.30.
Vendors losing ground also included Liz Claiborne Inc., down 15 percent to $2.09; Jones Apparel Group Inc., 11.1 percent to $3.94 and True Religion Apparel Inc., 9 percent to $10.73.
@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)
Not only does #TheProfit return to CNBC tonight, but @marcuslemonis has launched @shopmarcus, a new shopping and lifestyle retail experience in Aspen and Chicago, with more locations to come. The retail stores offer in-store stylists and a variety of contemporary womenswear selections.
“It’s life, I’m going to face it,” @mingxi11 sighed. “I fell, but you know, I think the most important thing is that I get back up. I had the love, the help from my sister — the girl next to me Gizele [Oliveira] — she’s so nice. When I went backstage everybody was trying to comfort me like ‘Oh Ming, it’s OK.’ I’m really, really touched. I think it’s them who gave me the courage to go back on stage for the finale,” Xi told WWD of her fall at the @victoriassecret fashion show. (📷: David Fisher) #wwdfashion #vsfashionshow #victoriassecret
@louisvuitton tapped @therealpeterlindbergh for its latest city-centric photo book, which is part of a series called Fashion Eye. The primarily black and white book captures the spirit of Berlin in 57 images shot between 1989 and 2019. “Berlin is an inspiration for me, more than a city. I mean @millajovovich is simply Berlin!” said Lindbergh. #wwdfashion
“You know, I think audiences expect a certain performance so I have to deliver to them what they’re expecting to a certain degree. But I’m also a different actor and a different person, I have my own spin on the character,” says @noahegalvin of his takeover of the leading role in “Dear Evan Hansen” following the departure of @bensplatt, who originated the role. Read WWD’s interview with the 23-year-old actor on WWD.com #wwdeye (📷: @jilliansollazzo)
For pre-fall 2018, @etro created richly-colored wonderland, using tapestries, textiles and wallpapers from the Eastern world at large. The line featured floral and graphic prints and jacquard motifs, like this two-piece look featured here. #wwdfashion (📷: Giovanna Pavesi)
@kith is moving into children’s. The men’s and women’s streetwear brand has launched Kidset, a Kith kids line located in New York at 64 Bleecker Street. The line includes mini versions of staple Kith pieces like the Astor bomber jacket and the Kith box logo sweatshirts, along with a wall that can display up to 120 pairs of shoes from @adidas, @newbalance, @timberland and more. #wwdfashion
“I just wanted to create this fully rounded character, but I do think what excited me most was just the opportunity to give a group of people representation that I feel needs it. I like to do characters in projects that stand for something and Karolina definitely does, so that was really exciting to me,” @ginnygardner says of her new role in @hulu’s “The Runaways.” Gardner plays Karolina Dean, a queer superhero, which is a rarity for @marvel. Read more about Gardner’s character on WWD.com #wwdeye (📷: @dandoperalski)