NEW YORK — Apparel and retail issues Monday fell along with other stocks as the equity markets sank to depths that were recently unthinkable — and unseen since the late Nineties.
Starting the week with its third decline in as many sessions, the Dow Jones Industrial Average on Monday dwindled by 234.68 points, or 2.9 percent, to end the day at 7,784.58. Since last Wednesday’s close, the index is off 8.9 percent and is at its lowest level since October 1998.
The financial markets’ crisis of confidence continued to rouse investor unease as lingering accounting scandals were brought to the forefront by the bankruptcy filing from telecommunications giant WorldCom over the weekend.
Without compelling news to lift retail shares in the face of negative bias in the overall market, the sector was forced to take it on the chin, again.
Department stores whose shares took cuts deeper than the market at large included: Kohl’s, down $2.84, or 4.8 percent, to $56.73; May Co., $1.24, or 4.5 percent, to $26.09; Neiman Marcus, $1.15, or 4.4 percent, to $25.25; Dillard’s, 87 cents, or 3.9 percent, to $21.70, and Nordstrom, 64 cents, or 3.6 percent, to $17.31. Federated fared slightly better, falling 76 cents, or 2.3 percent, to $32.24.
Department stores reporting weekly sales, which were generally in line with expectations, saw lesser declines. Among these were J.C. Penney Co., down 33 cents, or 2.1 percent, to $15.67, and Sears, Roebuck & Co. off 80 cents, or 1.8 percent, to $42.75. Discounters also reported weekly sales without surprises. Shares of Wal-Mart Stores were off $1.90, or 4.1 percent, to $44.60, while Target’s stock slid 87 cents, or 2.7 percent, to $31.05.
Specialty stores were slammed again, as well. Posting stock declines were Mothers Work, dropping $4.40, or 13.9 percent, $27.38; Chico’s FAS, $2.57, or 8.4 percent, to $27.97; Abercrombie & Fitch, $1.70, or 7.2 percent, to $21.80; Hot Topic, $1.53, or 7.1 percent, to $20; Talbots, $1.71, or 5.8 percent, to $27.64; Bebe, 85 cents, or 5 percent, to $16.05; Charlotte Russe, 73 cents, or 4.7 percent, to $14.97; Gap, 49 cents, or 4 percent, to $11.66; Urban Outfitters, 95 cents, or 4 percent, to $22.65; Ann Taylor, 78 cents, or 3.5 percent, to $21.80, and Claire’s, 55 cents, or 3.1 percent, to $16.95.Meanwhile, seasickness in its travel business prompted Wilsons The Leather Experts Inc. to severely curtail earnings expectations for the year following the closure of Friday’s market. Shares of Wilsons dove $2.04, or 19.8 percent, to end the day Monday at $8.25.
Currently in its second quarter, the firm now expects profits of 51 to 56 cents a diluted share in fiscal 2002, compared with previous projections of 88 to 93 cents. Sales for the 12 months are slated to be in the $775 million to $785 million range. Wilsons’ core stores, which represent about 85 percent of its revenues, continue to perform as expected. Comparable-store sales are expected to decrease in the firm’s travel stores through mid-September, with lower-than-expected overall increases in comps thereafter.
"As our new management and systems provided us more insight into the softening sales and margin trends, it became apparent that changes in merchandise assortment would be necessary to turn these trends around," said chief executive officer Joel Waller in a statement. "A shortage of luggage inventory in the stores has been largely responsible for the lower-than-expected comparable-store sales performance.
In tandem with the Dow’s decline, the Nasdaq ended down 36.5 points, or 2.8 percent, at 1,282.65. Sliding further was the Standard & Poor’s 500, which closed off 27.91 points, or 3.3 percent, at 819.85.
By far, the best-performing Dow component stock for the day was Procter & Gamble Co., which said it would reinvigorate stock repurchases under its buyback plan for fiscal 2003. Shares of the consumer products company shot up $3.37, or 4.5 percent, to close at $77.83.
P&G told investors in a statement that it remains "confident" about its business and will use free cash flow to repurchase shares on a discretionary basis.
Standard & Poor’s debt analyst Lori Harris in a release noted: "The level of share repurchases declined in fiscal 2002 compared with the previous three-year average of $1.85 billion per year because the primarily debt-financed $4.95 billion acquisition of the Clairol hair care business in November 2001 reduced the company’s financial flexibility." Harris said the ramp up would not interrupt payment of dividends, alter P&G’s capital spending goals nor increase debt.Bankrupt Kmart on Monday reported a $137 million loss on sales of $2.33 billion for the four weeks ended June 26. Same-store sales, excluding the 283 previously announced closures, dropped 8.7 percent against a year ago. Shares of the firm inched up 2 cents, or 3 percent, to close at 69 cents.
Kmart, which has a $2 billion debtor-in-possession financing facility, used $370 million for letters of credit as of June 26. Including a 5 percent holdback equaling $100,000 in reserves, the struggling retailer has $1.53 billion left in availability under the credit line.
Chapter 11 expenses during the month include $11 million in professional fees, $8 million in stay bonuses from the Key Employee Retention Program and $3 million in other reorganization expenses. The expenditures were offset by $10 million in reorganization income for the settlement of ten of the 283 store leases closed in June.
Broadline retailers reporting weekly sales pushed on with few surprises.
After last week, Wal-Mart said it was still set to post a comparable-store sales jump of 5 to 7 percent in both its flagship division and the entire company for July. Sears also stayed on course, and said it continues to see a same-store sales drop in the mid-single digits for the month. Apparel has continued to be soft, while hardline sales were the top sellers for the week. J.C. Penney noted same-store sales for the month are now on track to decline by 2 percent, at the positive end of initial estimates of a 2 to 4 percent decline.
Meanwhile, reporters in Argonne, Ill., on Monday peppered President Bush with questions about WorldCom, the equity markets and recent calls for the resignation of Treasury Secretary Paul O’Neill.
Bush insisted corporate earnings and price/earnings ratios should prompt the public to buy.
"Value," he said. "They’re going to realize there’s values in the market."
Defending O’Neill, Bush said he is doing a "fine job. If they are going to hold him accountable for a market going down, they ought to give him credit when the market goes up.
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