NEW YORK — Retail issues gleefully went along Wednesday as Wall Street took its biggest, and perhaps most eagerly anticipated, bull ride of the year.
Shares of DuPont, a Dow Jones Industrial Average component stock, jumped $3.23, or 8.7 percent, to end the day at $40.28, as dramatic reductions in its textile-related losses helped propel it to breakaway second-quarter results that exceeded analysts’ estimates by 5 cents.
In a trading session that brought smiles to replace earlier dread, department, discount and specialty store sectors all took off, outshining the indices with double-digit surges in the price of their shares.
While the Dow recorded its first up day of the week, a 488.95 point advance, or 6.4 percent, to 8,191.29, the Standard & Poor’s Retail Index followed a miniscule 0.1 percent advance on Tuesday with a 20.32 point gain, or 7.9 percent, on Wednesday,finally settling in at a cozy 278.39.
For the Dow, the increase was the largest percentage gain since the market rebounded two days after the Oct. 19, 1987 crash with a 10.2 percent increase. Wednesday also marked the second-biggest point gain in Dow history.
Department stores with bountiful increases in their stock prices included: Kohl’s, up $6.30, or 10.9 percent, to $64; Dillard’s, $2.30, or 10.6 percent, to $24; J.C. Penney Co., $1.44, or 9.4 percent, to $16.71; May Co., $2.52, or 9.4 percent, to $29.26; Sears, Roebuck & Co., $3.72, or 8.7 percent, to $46.32; Neiman Marcus, $2.15, or 8.6 percent, to $27.03; Federated, $2.62, or 7.9 percent, to $35.87, and Nordstrom, $1.30, or 7.4 percent, to $18.90.
Among discounters, Target rose $2.62, or 8.6 percent, to $33.08 and Wal-Mart, also a Dow component, picked up $2.84, or 6.3 percent, to end the day at $47.94.
The largest apparel-related advances came from specialty stores. Those on the high-riding comeback trail included: Ann Taylor, increasing $3.75, or 17.9 percent, to $24.65; Urban Outfitters, $3.65, or 16 percent, to $26.40; Deb Shops, $4.18, or 15.3 percent, to $31.50; Charming Shoppes, 89 cents, or 14.6 percent, to $6.98; Mothers Work, $3.01, or 11.4 percent, to $29.50; Chico’s FAS, $3.12, or 11.1 percent, to $31.12; Too, $2.40, or 10.2 percent, to $25.95; Wet Seal, $1.59, or 9.9 percent, to $17.68; Hot Topic, $1.94, or 9.7 percent, to $21.94; Abercrombie & Fitch, $1.75, or 8.3 percent, to $22.75 and Ross, $2.91, or 8.1 percent, to $39.01.After starting the day down, and reigniting investor fears, the Dow quickly strode into positive territory, calmed by reassuring words from the financial sector. After trading up solidly all day, it strengthened 200 points in the last hour.
A record 2.7 billion shares changed hands on the the New York Stock Exchange.
The Standard & Poor’s 500 leapt a lesser 45.72 points, or 5.7 percent, to close at 843.42. Shares in the Nasdaq index jumped a collective 61.18 points, or5 percent, to 1,290.23.
Meanwhile at DuPont, lower raw material costs, reduced fixed-cost spending and improved capacity utilization helped the textiles and interiors segment narrow by seven-eighths its second-quarter aftertax operating losses, to $52 million from $413 million a year ago. Exclusive of a slew of one-time items in both quarters, aftertax operating profits for the division grew 13 times to $91 million from $7 million a year ago.
Special items figuring into the most-recent quarter included $100 million in separation costs for about 2,000 employees and $43 million for related facility shutdowns.
For the quarter ended June 30, the unit’s sales deflated 2.7 percent to $1.7 billion from $1.74 billion a year ago, due to the exit of certain polyester businesses. On a comparable basis, sales were 2 percent higher. The modest growth came from a 9 percent volume increase — led by segment improvements in flooring and spandex — offset by decreased selling prices.
"The earnings improvement reflects very strong productivity improvements as fixed costs were down double digits from the prior year, due to divestiture and to the larger second-quarter 2001 restructuring," said Ann Gualtieri, vice president of investor relations, on a conference call. "Lower raw material costs also contributed significantly to improved earnings.
"Apparel sales were about level with last year as strong volume gains in both branded Lycra and generic Elaspan were essentially offset by lower Lycra and textile nylon prices," said Gualtieri. Elaspan prices have risen modestly year over year, while Lycra prices were down.
Credit Suisse First Boston equity analyst William Young said the division "did better than I expected." He said some of the upside seen in the quarter could be taken away in the back half when higher raw material prices work their way onto the firm’s financial statements.With the business strengthening, Young said, the proposed spinoff of the division in an initial public offering is "a very doable event."
Also, DuPont’s overall performance in the second quarter saw improved earnings on declining sales.
Profits for the chemicals giant totaled $543 million, or 54 cents a share, compared with year-ago losses of $213 million, or 21 cents. Charges deflated the quarter’s profits by 17 cents. Adjusted profits came in a nickel ahead of Wall Street’s estimates of 66 cents a share. Most significant among the charges was $209 million to restructure the textile and interiors segment. Overall, sales for the period slid 6.8 percent to $6.73 billion from $7.21 billion a year ago.
Revising profit projections, DuPont backed equity analysts off their estimates for the back half of the year. DuPont set underlying earnings projections for the second half at about 60 cents, 11 cents behind analysts’ expectations of 71 cents. While aiming short of Wall Street’s best guess by only a penny in the fourth quarter, third-quarter earnings are expected to hit 24 cents, "about double" year-ago adjusted EPS of 12 cents, but 10 cents lower than analysts had foreseen.
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