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Retail Stocks Slip 2.8 Percent

Moody's placed privately held Neiman Marcus Inc.’s ratings under review for possible downgrade.

Retail stocks slid 2.8 percent on Monday as stores and investors limped toward fourth-quarter results next month and President Bush, at the request of President-elect Barack Obama, asked Congress for the remaining $350 billion in bailout funds agreed to in October.

This story first appeared in the January 13, 2009 issue of WWD.  Subscribe Today.

The Standard & Poor’s Retail Index fell 8.06 points to 277.37, outpacing the market on the way down.

Late in the day, Moody’s Investors Service placed privately held Neiman Marcus Inc.’s ratings under review for possible downgrade and affirmed its SGL-2 speculative grade liquidity rating. Moody’s action was prompted by Neiman’s 27.5 percent dip in December same-store sales and cited the “unexpected magnitude of the revenue decline, as well as the potential loss of aspirational customers and the weaker spending by Neiman’s traditional upscale customers.”

The Dow Jones Industrial Average fell a milder 1.5 percent, or 125.21 points, to 8,473.97 as Citigroup Inc. declined 17 percent amid speculation the banking giant would spin off of its Smith Barney brokerage business. More help could be on the way for Wall Street, should lawmakers OK the second half of the $700 billion in bailout funds, which would be distributed under Obama’s watch.

Retailers will likely have to bail themselves out or sink, as has already been the case for some weaker players in the market. So far this year, Goody’s Family Clothing Inc. decided to liquidate and urban-themed Against All Odds USA Inc. filed for Chapter 11 protection. More are expected to take a similar route after what was the weakest holiday season in years.

The outlook for at least the next few months doesn’t look any cheerier.

“The mall was substantially slower this week than last and retailers are increasingly blunt in their market messages to drive traffic,” said Amy Noblin, retail equity analyst at Pali, in a research note Monday, noting returns outweighed sales on some days for some retailers.

Seventy-five-percent-off signs are still a fact of life for some stores as retail supply and demand have yet to come into balance.

Noblin said Aéropostale Inc., Chico’s FAS Inc. and Urban Outfitters Inc. have done a relatively better job of clearing out winter inventory, but Abercrombie & Fitch Co. and Zumiez Inc. still had “substantial clearance” to work though.

Specialty stores of every stripe were bruised in Monday’s sell-off.

Among the decliners were Eddie Bauer Holdings Inc., down 17.7 percent to 65 cents; Tween Brands Inc., 15.5 percent to $4.03; Charming Shoppes Inc., 10.4 percent to $1.90; Zale Corp., 10.2 percent to $3.08; The Talbots Inc., 10 percent to $2.07; Pacific Sunwear of California Inc., 8.7 percent to $1.37; Bebe Stores Inc., 7.3 percent to $5.98; The Men’s Wearhouse Inc., 7 percent to $12.32; New York & Company Inc., 6.8 percent to $2.20; Gap Inc., 6.7 percent to $12.12, and AnnTaylor Stores Corp., 5.9 percent to $5.09.

Broadline retailers were also on the wane with Dillard’s Inc., down 10.3 percent to $3.83; Saks Inc., 7.7 percent to $3.72; Nordstrom Inc., 4.2 percent to $13.37, and Macy’s Inc., 3.6 percent to $9.93.

The consumer weakness has trickled down through the stores to the vendors that supply them, which are also getting pushed around in the stock market.

Vendors losing ground Monday included Perry Ellis International Inc., down 12.8 percent to $4.51; Liz Claiborne Inc., 9.2 percent to $2.97; G-III Apparel Group Ltd., 8.9 percent to $5.75; Oxford Industries Inc., 7.8 percent to $7.18; Jones Apparel Group Inc., 7.1 percent to $4.57; True Religion Apparel Inc., 6.3 percent to $12.27; Phillips-Van Heusen Corp., 6 percent to $17.53, and The Warnaco Group Inc., 4.8 percent to $17.12.