NEW YORK — After taking a beating on the prospects of higher gas prices this summer of $2.15 a gallon, retail and vendor shares retreated last week.
As a result, the WWD Composite Stock Index fell 1.2 percent to 1,161.03. The S&P 500 dropped 1.8 percent, week-over-week, to 1,200.08.
Aside from fuel costs, the biggest attention grabber on Wall Street last week was a bullish report from UBS analyst Gary Balter, who tagged shares of Kmart Holdings Inc. with a $160 price target.
On Friday, Kmart’s stock jumped as investors digested the upbeat report. Shares of Kmart rose more than 14 percent in the after-trading session. By the end of the day, the stock closed up 13.3 percent to $127. Sears, Roebuck & Co. also soared on the news, closing Friday’s trading session up 7.9 percent to $57.56.
Balter upgraded shares of both retailers, who are looking to get shareholder approval on their proposed $11 billion merger later this month, to “Buy 2.”
In the report, Balter said the “cash flow opportunities [are] too good to ignore” and added that his $160 price target is “based on the ability of the company after the merger with Sears to generate significant cash flow through asset sales, cross-selling of proprietary brands, and cost savings, particularly at Sears.”
Still, Balter said the deal has risks. “Unlike pre-merger Kmart, the asset support does not offer as much protection and the commodity nature of Sears’ key products make one key element of the Eddie [Lampert] story, price increases, less available. Yet, the potential for cost-cutting and vendor support is compelling.”
Lampert, the hedge fund wizard who bailed Kmart out of bankruptcy, is credited with turning around specialty auto parts retailer AutoZone. As a result, Balter said “Eddie stories work best early,” and AutoZone “continues to show cost savings after five years.”
Meanwhile, shares of Quiksilver Inc. hit a new 52-week high in New York Stock Exchange trading Friday following the release of strong first-quarter numbers after Thursday’s market close. Spurred by revenue increases in all geographic markets and the addition of DC Shoes, the firm said net income in the three months ended Jan. 31 rose 54.9 percent to $14.2 million, or 23 cents a share, from $9.2 million, or 16 cents, in the first quarter of the prior year. Revenues rose more than one-third to $342.9 million from $256.1 million in the year-ago quarter. European revenues rose 24.9 percent to $132.6 million and were up 16 percent in euros. The firm, based in Huntington Beach, Calif., currently expects full-year earnings of between $1.62 and $1.65 a share on sales of between $1.48 billion and $1.5 billion. Quiksilver’s shares closed the day up 6.5 percent to $34.99 after hitting the new 52-week high of $35.61 in intraday trading.WWD COMPOSITE STOCK INDEX VS. S&P 500
Breaking News: @louisvuitton's men's artistic director @mrkimjones is leaving the French fashion house after nearly 7 years. Jones joined Louis Vuitton in 2011, following a three year tenure as creative director of British luxury goods brand Alfred Dunhill. Jones is to exit Louis Vuitton after showing his fall 2018 collection for the brand in Paris on Thursday. Read the full exclusive story on WWD.com. Link in bio. #wwdnews #wwdfashion
For men’s fall 2018, @giuseppezanotti drew on elements from streetwear, sport, biker, combat and rock ‘n’ roll. Pictured here are a pair of shoes from the collection, featuring zippers, rhinestones, and silver hardware. Head to WWD.com to see a roundup of the accessories from Milan’s men’s fall 2018 shows. #wwdfashion (📷: Andrea Delb)
To celebrate the 25th anniversary of @ralphlauren’s snowboarding collection, the brand is mining its archives. The iconic brand is reintroducing vintage styles and dropping new designs for a color capsule that will be available in Ralph Lauren stores and @openingceremony on January 25. The capsule will consist of 10 pieces, including the Snow Beach Pullover, pictured here, which is a collector’s item that rapper Raekwon wore in Wu-Tang Clan’s “Can It Be All So Simple” video. #wwdfashion (📷: Tom Gould)
For @rochasofficial’s pre-fall 2018 collection, creative director Alessandro Dell’Acqua channeled the sophisticated and intriguing Catherine Denevue in the film “Belle de Jour.” Polished collarless coats, midi skirts, suits and ’60s graphic motifs were all featured in the collection, adding a sense of discreet luxury. See the rest of the photos on WWD.com #wwdfashion
“We tried to produce clothing of that couture quality, but the most daunting part was that we only had a matter of days [to do it],” said costume designer Lou Eyrich, who recreated Gianni Versace’s iconic looks for @americancrimestoryfx. Eyrich searched online retailers and vintage shops for original pieces from the design house and for @penelopecruzoficial, who plays Donatella Versace. Head to WWD.com to read how she created the Versace world. #wwdfashion
Only three months after her stellar debut catwalk season, @kaiagerber has inked her first big design collaboration –– with @karllagerfeld. The collection blends Lagerfeld’s Parisian chic aesthetic and the model’s signature West Coast casual style via RTW, accessories, footwear and more. The #KarlLagerfeldxKaia collection will launch in September with a series of events. Get all the details on WWD.com. #wwdnews #wwdfashion
Harrods plans to remove the famous statue of Princess Diana and Dodi Al Fayed from the bottom of the Egyptian escalators and hand it back to Mohamed Al-Fayed. “We are very proud to have played our role in celebrating the lives of Diana, Princess of Wales and Dodi Al Fayed at Harrods and to have welcomed people from around the world to visit the memorial for the past 20 years,” said Michael Ward, Harrods managing director. “With the announcement of the new official memorial statue to Diana, Princess of Wales at Kensington Palace, we feel that the time is right to return this memorial to Mr. Al Fayed and for the public to be invited to pay their respects at the palace.” More on the news, with reporting by @loreleimarfil, at WWD.com. #wwdnews