Retail stocks surged 2.7 percent Thursday, retaking ground not seen since October, as the Dow Jones Industrial Average broke through the 9,000 mark.
This story first appeared in the July 24, 2009 issue of WWD. Subscribe Today.
Investors were driven by some encouraging news on earnings, including eBay Inc.’s forecast for better-than-expected third-quarter profits, and word that existing home sales rose for the third consecutive month.
While the economy has shown some signs of improvement, with credit markets rebounding, the toll exacted by a 9.5 percent unemployment rate remains a big question mark for retail.
“Less bad is good enough right now [for investors],” said Marie Driscoll, equity analyst at Standard & Poor’s. “That may well change going forward.”
The S&P Retail Index advanced 9.29 points to 352.53, the first close over 350 since Oct. 1, when global markets were in free-fall and the credit crunch was worsening.
Retailers joining in the rush included New York & Company Inc., up 13.6 percent to $3.60; AnnTaylor Stores Corp., 11.9 percent to $9.60; Coldwater Creek Inc., 11.4 percent to $6.27; Charlotte Russe Holding Inc., 9.5 percent to $14.50; Dillard’s Inc., 9 percent to $9.05; Chico’s FAS Inc., 6.8 percent to $10.83; Nordstrom Inc., 6.3 percent to $25.79; Macy’s Inc., 4.8 percent to $13.28, and J.C. Penney Co. Inc., 0.5 percent to $29.42.
But even the good news supporting Thursday’s rally had a touches of gray.
June home sales did increase 3.6 percent from a year earlier, but the median home price fell 15.4 percent to $181,800, according to the National Association of Realtors.
Retailers now also have to contend with the possibility that Amazon.com will become a more aggressive player in the fashion world after reaching a deal to buy online shoe and apparel merchant Zappos.com.
“This acquisition could put Amazon on a competitive collision course with key department stores,” said Credit Suisse analyst Michael Exstein, pointing specifically to Nordstrom, Penney’s and Macy’s.
Zappos.com, which has sales of about $1 billion and is primarily a shoe seller, could also pressure companies with big footwear businesses, such as Jones Apparel Group Inc.
Pacific Sunwear of California Inc. was one of just a few apparel retailers to miss out on Thursday’s rally. Its shares slumped 10.3 percent to $3.05 after the firm said its second-quarter loss and same-store sales declines would be worse than projected.
The Anaheim, Calif.-based retailer now expects losses of 22 to 24 cents a share instead of the 11 to 17 cents anticipated in May. Comps, originally expected to drop 17 to 20 percent, are now expected to fall about 24 percent.
American Apparel Inc. shares rose 11 cents, or 3.1 percent, to $3.70 in trading Thursday, but the retailer said after the close of the markets that it would restate its 2008 consolidated financial statements, moving $33.4 million of $49.4 million borrowed under its revolving credit facility into current liabilities from the long-term debt category. It said the change to the balance sheet would not affect its previously reported cash position, profits or sales figures.