U.S. retail stocks inched up Wednesday — holding on to the prior day’s gains, which were driven by better February retail sales — but J.C. Penney Co. Inc. lost ground after an analyst raised a warning flag on the company’s turnaround efforts.
This story first appeared in the March 15, 2012 issue of WWD. Subscribe Today.
Shares of Penney’s slipped 2.6 percent to $36.64 as the S&P Retail Index rose 0.2 percent, or 1.14 points, to 603.86 — the index’s highest close ever. The Dow Jones Industrial Average advanced 0.1 percent, or 16.42 points, to 13,194.10 after rallying almost 218 points Tuesday.
Deutsche Bank analyst Charles Grom said the trend in Penney’s same-store sales appeared to be worsening.
“Specifically, we noticed that the new pricing message has yet to resonate as traffic is weak, commentary regarding missing coupons is overwhelmingly abundant, and Best Price Friday generates the most interest,” Grom said.
He also said employees had received limited training on the company’s new strategy and that morale has waned since payroll hours were cut.
Chief executive officer Ron Johnson, the former head of Apple retail, is in the midst of a high-profile reinvention at Penney’s, simplifying pricing by reducing the number of sales and culling brands to make room for shops-in-shop.
Grom said Penney’s stores look much better but that “you can hear crickets when you walk the floor.” The analyst said traffic appeared to be very weak and the core Penney’s customer seemed to miss the “feeling of getting a deal” while some shoppers, particularly among the younger set, “get it.”
In Europe, markets were up in Frankfurt, Paris and Milan, with banking stocks leading the gains. London’s FTSE 100, however, slipped 0.2 percent to 5,945.43 after the U.K.’s Office of National Statistics said unemployment in the country ticked up to 8.4 percent.
Among the region’s biggest decliners were French Connection, which plunged 8.9 percent to 0.5 pounds, after the company reported a fall in pretax profits.
The euro traded at $1.31 against the dollar, while the pound traded for $1.56.