By  on May 30, 2008

Shares of J. Crew Group plunged 20.5 percent Friday, dragging down the apparel sector investors heeded the retailer’s profit warnings.

The preppy specialty retailer topped New York Stock Exchange’s list of biggest decliners, closing at $37.30. After the markets closed on Thursday, J. Crew slashed its full-year earnings outlook even as it posted higher earnings that exceeded the consensus estimate. The new estimate for the year is $1.70 to $1.75 a diluted share, down from previous guidance of $1.85 to $1.87. Although tame by comparison, the range for the current year is still above the $1.52 a share earned last year.

The cut shook up investors and prompted them to sell off their holdings in other specialty retailers. Overall, J. Crew has been able to withstand the economic downturn better than most apparel companies.

“Management has been saying and operating under the belief that the United States was in a recession for several months now,” said Jennifer Black, president of the firm bearing her name. “The guidance the company gave for the remainder of the year took into account lowered expectations of flat to low-single digit comps for the stores throughout the remainder of 2008, we believe.”

The Standard & Poor’s Retail Index slipped 0.6 percent to 402.04, while The Dow Jones Industrial Average fell 0.2 percent to 12,623.67. The broader S&P 500 was up 0.1 percent to end the day at 1,399.39.

Among mall-based retailers, Urban Outfitters Inc. fell 1.9 percent to $32.19, American Eagle Outffiters Inc. dropped 4.3 percent to $18.23, Aeropostale Inc. declined 2.5 percent to $34.87, and Abercrombie & Fitch Corp. slid 1.9 percent to close at $72.69.

But Citi Trends managed to gain 15.3 percent to close at $22.30, after J.P. Morgan upgraded the company based on improving results.

The Wet Seal Inc. also saw shares climb 4.7 percent to $4.48. The teen retailer reported an 18 percent increase in first-quarter earnings on Thursday and forecasted better-than-expected second-quarter earnings.J.P. Morgan upgraded the company to “overweight” from “neutral.”

Shares of Tiffany & Co., which early Friday reported a 19.1 percent increase in first-quarter profits, rose 2.7 percent to close at $49.03.

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