Retail Stocks Slip Thursday

Sector declines 1.3% as consumer prices dip, unemployment claims rise.

Retail stocks gave up 1.3 percent Thursday after consumer prices dropped for the second straight month and investors pulled away from the sector.

This story first appeared in the June 18, 2010 issue of WWD.  Subscribe Today.

The S&P Retail Index fell 5.46 points to 432.74, as the Dow Jones Industrial Average inched up 0.2 percent, or 24.71 points, to 10,434.17.

Government reports showed that more people were registering for unemployment and that businesses had little pricing traction. U.S. consumer prices fell 0.2 percent in May after slipping 0.1 percent in April. And initial claims for unemployment rose 12,000 last week to 472,000 where economists were looking for a decline to 450,000.

Asian investors pushed the Nikkei 225 down 0.7 percent to 9,999.40 in Tokyo as the Hang Seng Index inched up 0.4 percent to 20,138.40 in Hong Kong. In Europe, the CAC 40 rose 0.2 percent to 3,683.08 in Paris as the FTSE 100 increased 0.3 percent to 5,253.89 in London and the DAX advanced 0.5 percent to 6,223.54 in Frankfurt.

• Limited’s Sun Stroke: Limited Brands Inc. said on Wednesday it has sold its remaining 25 percent stake in Limited Stores LLC to Sun Capital Partners Inc. for $32 million. Sun Capital now fully owns the brand, having bought a 75 percent stake in 2007 from Limited Brands Inc., whose chief executive officer, Leslie Wexner, decided to shed the underperforming apparel businesses he founded in the Sixties.

Meanwhile, Limited collaborated with Jodi Arnold for a spring collection, and will carry an Arnold collection for fall before working with a new designer next spring. It is also searching for space in Manhattan for a permanent store, planning an expansion of its online bridalwear business and relaunching its Web site next month. Shares of Limited slipped 1.3 percent to $25.03.

• Saks on the Upswing: Debt watchdog Fitch Ratings boosted its issuer default rating on Saks Inc. to “B” from “B-minus” given “positive momentum in comparable-store sales trends since December and the improvement in EBITDA and credit metrics relative to expectations.” Fitch has a cautious outlook on the luxury sector, but expects Saks to report low-single-digit comp growth in 2011 and 2012. Saks’ stock rose 0.1 percent to $9.23.

• Burlington Coat Posts Profit: Burlington Coat Factory Investments Holdings Inc. generated net income of $5.2 million in the first quarter ended May 1, reversing a $36.9 million loss inflated by $24.6 million in pretax impairment charges in the year-ago quarter. Sales rose 7.8 percent, to $894.7 million, and were up 3.3 percent on a same-store basis. Burlington Coat was acquired for $2.06 billion and taken private by Bain Capital Partners in 2006.

• Aéropostale’s Flight Plan: Aéropostale has the distinction of being one of the few teen retailers to log positive comp-store sales growth during the recession — not to mention the last 14 years. Thomas P. Johnson, co-chief executive officer of Aéropostale, highlighted the results at the company’s annual meeting Thursday in Manhattan. “We understand what’s happening in our market. As we supplement our core brand with fashion, we’re getting a great response.”

The biggest opportunity for Aéropostale is the kids concept, P.S. by Aéropostale, aimed at seven- to 12-year-olds. The core brand is geared toward 14- to 17-year-olds. “The brand has strong momentum. It could be a 500-plus store chain,” said Johnson.

Aéropostale is building its infrastructure to support its planned growth with new warehouses in the U.S. and Canada and investments in technology. Store remodeling is also a top priority. “We will remodel many stores in the next three to five years,” Johnson said. “The remodeled stores are out-comping old stores by double the comps. Our stores are very productive and do about $600 a square foot in sales. We have about 170 stores that do $800 in sales per square foot.”

Aéropostale is looking for high-profile real estate such as its 17,000-square-foot Times Square flagship on Broadway between 44th and 45th Streets.

The company this year plans to open 30 stores each for Aéropostale and P.S. by Aéropostale.