By  on August 14, 2006

NEW YORK — Despite a surge in stocks on Thursday, major indices closed the week on a down note as higher oil prices and worries over the impact of a slowing economy troubled investors. The S&P 500 wrapped up the week down 1 percent, to 1,266.74 from 1,279.41 the prior week. In the retail sector, the S&P Retail Index closed Friday up 0.3 percent from the previous day after gaining 2.2 percent during Thursday's retail stock rally. The WWD Composite Stock Index finished the week down 0.1 percent, to 1,048.81 from 1,050.04.

The surge in retail shares Thursday was fueled by robust earnings from Target Corp., Kohl's and J.C. Penney.

Penney's second-quarter net income soared 36.6 percent, to $179 million, bolstered by strength in its private label business and a rebound in women's apparel sales. Total sales rose 6.5 percent, to $4.24 billion from $3.98 billion.

Myron E. "Mike" Ullman 3rd, chairman and chief executive officer of J.C. Penney Co. Inc., said during a conference call, "We have brands that inspire" and Penney's will "continue to strengthen our brand offering within the context of our lifestyle merchandising."

Ullman told analysts the retailer plans to open 25 stores in the third quarter. On Friday, most analysts' reports praised Penney's financial execution in the second quarter.

Adrianne Shapira, Goldman Sachs equity analyst, said in a research note Friday that the retailer's gross margin rate came in higher than expected. "While we are revising our [third- and fourth-] quarter earnings per share estimates higher due to lower share count (232 million versus 238 million prior), we believe further upside could exist via margin expansion," she wrote.

"As for the stock, we continue to view J.C. Penney as a best-in-class operator, but prefer the shares of Federated, over the medium term, given their lower relative valuation," Shapira said. "However, J.C. Penney stock remains an excellent long-term investment vehicle, given its competitive positioning, superior inventory management and growth outlook."

Shares of the retailer closed the week up 1.4 percent at $65.30.

On the vendor side, The Warnaco Group Inc. said Tuesday that it would restate its previously reported financial statements for the fiscal year ended Dec. 31 and for the first fiscal quarter ended April 1 because of irregularities relating to the accounting for certain returns and vendor allowances. Warnaco said it discovered the errors and irregularities during the company's closing review for its second fiscal quarter ended July 1. The company reports results today.Standard & Poor's Ratings Services said Friday that it revised its outlook on Warnaco ratings to "stable" from "positive." The ratings service also affirmed the company's corporate ratings.

"The financial impact of these restatements will not significantly affect credit-protection measures," the ratings firm said in a statement.





Weekly % Changes
(Ending July 28)
Gainers
Decliners
Close
Change
 
Close
Change
Revlon
1.27
32.29
Perfumania
11.12
-16.14
Oxford
40.40
12.85
Pacific Sunwear
13.62
-12.36
Urban Outfitters
15.71
6.94
Inner Parfums
17.28
-10.79
Dillard's
31.32
4.23
True Religion
17.36
-8.15
Hampshire Group
16.62
3.68
Retail Ventures
14.07
-7.68

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