Retail Stocks Tread Water

S&P index unable to hold gains from earlier in day.

Retail shares struggled to lock in advances throughout the day Monday and ended trading just slightly below their starting point.

This story first appeared in the March 9, 2009 issue of WWD.  Subscribe Today.

The S&P Retail Index was down less than 0.1 percent, closing the session at 228.76. While retail stocks spent nearly the entire day in positive territory before dipping into the red, the major indices, battered by uncertainty about financial stocks and federal economic policy that wasn’t eased by Merck & Co. Inc.’s agreement to buy Schering-Plough Corp., weaved back and forth between gains and losses before ending the day on the down side. By the time the closing bell sounded, the Dow Jones Industrial Average was off 1.2 percent at 6,547.05, the S&P 500 down 1 percent at 676.53 and the Nasdaq Composite 2 percent lower at 1,268.64.

The largest decline registered among the stocks tracked by WWD came from AnnTaylor Stores Corp., which fell 17.3 percent to close at $2.82, establishing a new all-time low of $2.41 earlier in the day. This follows its 38.5 percent drop on Friday, when the retailer reported a larger-than-expected fourth-quarter loss and plans for 46 additional store closures. Battling reduced consumer spending, and especially hard hit by the decline in consumption of career apparel in light of the brutal employment environment, the company has seen its stock drop by more than half in the last three trading sessions.

On the other side of the ledger, General Growth Properties Inc. enjoyed a 5-cent, or 15.2 percent, increase to 38 cents after The Wall Street Journal reported that the property group is formally asking holders of $2.3 billion of its bonds for nine months to work out its debts to avoid bankruptcy.

Based on what he described as a “peak of negativity,” Brean Murray, Carret & Co. analyst Eric Beder lowered his 2009 earnings projections for Bebe Stores Inc., Coldwater Creek Inc., Guess Inc., G-III Apparel Group Ltd., Maidenform Brands Inc., Perry Ellis International Inc., True Religion Apparel Inc. and Warnaco Group Inc., as well as his 2010 estimates for Bebe, True Religion and Warnaco and his price targets for Bebe, G-III and Perry Ellis. However, he reiterated his “buy” ratings for Bebe, Guess, G-III, Perry Ellis, True Religion and Warnaco.

He said “there is light at the end of the tunnel,” noting that in the second half of 2010 companies should benefit from lower transportation and production costs, “materially lower” inventories, benefits from cost cuts and far easier comparisons.