Saks Inc.’s improved financial results won a pat on the back from one ratings agency Tuesday and helped the retailer’s shares, and the S&P Retail Index, hit a new 52-week high in intraday trading.
Moody’s Investors Service lifted Saks’ outlook to stable from negative and upgraded its senior unsecured notes one tick to “B3” from “Caa1,” moving them to the family subject to “high credit risk” from those considered at “very high credit risk” while still keeping them in speculative territory.
The retailer’s shares peaked Wednesday at $8.60, their high in the past year, before settling at the close at $8.48, up 6 cents, or 0.7 percent, in New York Stock Exchange trading. The previous high point for the past year was $8.54 on Monday. The S&P Retail Index gained 1.92 points, or 0.4 percent, to end the day at 446.04, close to its high point of the day, and the last 52 weeks, of 446.17.
“The change in outlook to stable reflects our belief that Saks will improve its operating income and credit metrics over the next two quarters to levels appropriate for its rating,” said Maggie Taylor, senior credit officer at Moody’s, adding Saks’ repayment of its revolving credit facility places less debt in front of the upgraded notes.
The move reflects Moody’s belief that, while credit metrics for the New York-based retailer “will improve but remain weak” in the next year, it will return to operating income from operating losses in that time frame.
Last month, Saks reported a sharply reduced loss for the fourth quarter ended Jan. 30 that, exclusive of one-time charges, translated into a profit of 6 cents a diluted share. While sales fell 3.4 percent, to $811.3 million, and were off 4.8 percent on a comparable-store basis, they were better than results for the full year, when revenues declined 13.5 percent, to $2.63 billion, and comps eroded 14.7 percent. Gross margin in the quarter improved to 36.5 percent of sales from 21.2 percent in the final quarter of 2008.
Enduring the largest decline of stocks monitored by WWD, shares of Movado Group Inc. slid 19 percent to $11.42 following its statement late Monday it expected a fourth-quarter loss, exclusive of charges, to come in at a higher-than-anticipated 28 cents to 32 cents and that, due in part to a tax valuation allowance, losses are expected in the new fiscal year as well.
After beginning the day with a decline, the Dow Jones Industrial Average recorded a sixth consecutive day of increases, ending Tuesday’s session up 43.76 points, or 0.4 percent, at 10,685.91, less than 100 points from the 52-week high of 10,767.15 reached on Jan. 14. Like the S&P Retail, the S&P 500 and Nasdaq Composite both hit 52-week highs during the day and finished up 0.8 percent and 0.7 percent, respectively, at 1,159.46 and 2,378.01.
Helping to buoy stocks in the final two hours of trading Tuesday, the Federal Reserve maintained the target range for the federal funds rate at 0 to 0.25 percent and said economic conditions “are likely to warrant exceptionally low levels of the federal funds rate for an extended period.”
Earlier in its statement, the Fed remarked, “Household spending is expanding at a moderate rate, but remains constrained by high unemployment, modest income growth, lower housing wealth and tight credit. Business spending on equipment and software has risen significantly. However, investment in nonresidential structures is declining, housing starts have been flat at a depressed level and employers remain reluctant to add to payrolls. While bank lending continues to contract, financial market conditions remain supportive of economic growth.”
European markets gained traction on rising confidence that nations in the euro zone would come to the aid of Greece as it copes with a debt crisis. Standard & Poor’s Ratings Service reaffirmed its previous credit ratings and removed the nation from CreditWatch, where it had resided with negative implications since December. The decision helped lift the CAC 40 in Paris 1.2 percent to 3,938.95, the DAX in Frankfurt 1.1 percent to 5,970.99 and London’s FTSE 100 by 0.5 percent to 5,620.43. In Asia, Tokyo’s Nikkei 225 and Hong Kong’s Hang Seng Index sacrificed 0.3 percent each, ending at 10,721.71 and 21,022.93, respectively, but the SSE Composite Index rose 0.5 percent to 2,992.84.
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