Retail shares advanced 4.6 percent Friday, snapping a five-day losing streak following reports that President-elect Barack Obama plans to name New York Federal Reserve president Timothy Geithner as Treasury secretary, but both Saks Inc. and Nordstrom Inc. missed out on the rally following scrutiny from debt watchdogs.
The Standard & Poor’s Retail Index ended the day up 9.84 points to 223.34, rising from a record low set Thursday as investors shied away from stocks connected to consumer spending. The Dow Jones Industrial Average jumped 6.5 percent, or 494.13 points, to end the week at 8,046.42.
Saks’ stock fell 9.7 percent to $2.98 after Fitch Ratings reduced its long-term issuer default rating to “B” from “B-plus.” The rating indicates the debt is “highly speculative,” according to Fitch. The outlook on the rating is negative.
“The downgrade reflects the considerable deterioration in luxury department store sales and the resulting pressure on operating margins that already trail its peers, free cash flow and credit metrics,” said Monica Aggarwal, Fitch debt analyst, in the downgrade.
Nordstrom’s shares slid 7 percent to $7.81 after Moody’s Investors Service changed its outlook on the firm’s debt rating to negative from stable.
“This change in outlook reflects Moody’s concern with the increasingly negative view of consumer spending during the important upcoming holiday season, which will put further pressure on Nordstrom’s credit metrics,” said Ed Henderson, Moody’s vice president and senior analyst.
Nordstrom’s senior unsecured credit rating was affirmed at “Baa1,” meaning the firm’s debt is subject to “moderate credit risk,” according to Moody’s scale.
Most other retail stocks enjoyed gains on Friday.
Among the better performances for the day were Gap Inc., up 27.2 percent to $12.10 after reporting better third-quarter earnings Thursday; The Wet Seal Inc., 18.9 percent to $2.20; Urban Outfitters Inc., 15.4 percent to $14.79; Chico’s FAS Inc., 13.2 percent to $2.14; Coach Inc., 9.6 percent to $14.74; Limited Brands Inc., 7.3 percent to $7.65; Aéropostale Inc., 6.6 percent to $13.99; J.C. Penney Co., 5.3 percent to $15.14; Kohl’s Corp., 4.7 percent to $26.15, and Wal-Mart Stores Inc., 4.5 percent to $52.92.
However, Gottchalks Inc. bucked the trend with a 71.4 percent drop to 22 cents on news the regional department store inked an agreement for up to a $30 million investment from Everbright Development Overseas Ltd. Everbright’s investment includes $15 million in newly issued shares of the company’s common stock.
Among the vendors, both Liz Claiborne Inc. and Jones Apparel Group Inc. regained some of the ground lost in selloffs on Thursday. Jones’ stock rose 15.8 percent to $2.93, while Claiborne was up 8.5 percent to $1.79. Other vendors on the rise were Polo Ralph Lauren Corp., up 10.4 percent to $36.04; VF Corp., 7.1 percent to $42.80, and Phillips-Van Heusen Corp., 5.6 percent to $14.40.