Retail shares slouched toward 2009 Monday after stores and analysts espied weekend sales signs that screamed 50 to 70 percent off and found many chains still struggling to clear inventory.
The Standard & Poor’s Retail Index slid 1 percent, or 2.60 points, to 268.76. The Dow Jones Industrial Average dipped a milder 0.4 percent, or 31.62 points, to close at 8,483.93 after The Dow Chemical Co. said a planned $17.4 billion petrochemical and plastics venture with Kuwait fell through.
In order to turn in a flat performance for 2008, retail shares would have to stage a heroic 52.5 percent rally over the last two trading sessions of the year — something even the most optimistic Wall Street watcher is not predicting.
“With gift cards down, Christmas cash down and consumers tapped out on their credit cards, retailers didn’t get that big rush they were hoping for,” said Marshal Cohen, chief industry analyst at The NPD Group Inc.
Shoppers simply didn’t have the appetite to spend very much as the recession and financial crisis clamped down on consumer confidence and job prospects.
An estimated 20 to 30 percent drop in traffic in November and December likely led retailers to pull the trigger on clearance on Christmas Eve or earlier, said Roxanne Meyer, equity analyst at UBS Securities.
“We’re likely to see [buy-one, get-one] promos like never before, especially given that we believe demand for new product is only going to worsen,” Meyer said in a research note. “Our biggest concern is: What happens post-holiday, when we return to a purely self-purchasing environment?”
AnnTaylor Stores Corp.’s Ann Taylor business began cutting prices up to 60 percent on Dec. 17 and was featuring buy-one, get-one-half-off deals on denim after Christmas, said Meyer. Such promotions and their impact on future profits translated to a 12.1 percent drop in the firm’s shares to $9.11.
Other specialty chains experiencing declining market capitalization included The Talbots Inc., down 10.3 percent to $2.10; New York & Co. Inc., 9.3 percent to $1.95; Aéropostale Inc., 5.5 percent to $15.61, and Chico’s FAS Inc., 5.1 percent to $3.89.
“It has become even more imperative in the current economic uncertainty for retailers to be clean for the relatively weak January and February selling periods,” said Eric Beder, analyst at Brean Murray, Carret & Co.