NEW YORK — The WWD Composite Stock Index fell for the third straight week, declining 1.3 percent to 1,069.47 from 1,083.22 a week ago, despite consumer confidence readings that hit a two-year high.

This story first appeared in the July 6, 2004 issue of WWD. Subscribe Today.

The S&P 500 also retreated for the week, albeit by a more modest 0.8 percent to 1,125.38 from 1,134.32.

Retailers led the overall WWD index down, as disappointing revised June comparable-store sales forecasts from bellwether behemoths Wal-Mart Stores Inc. and Target Corp. not only depressed their respective share prices, but also reverberated throughout the sector.

Wal-Mart’s stock fell 1.1 percent to $51.93 from $52.51 last week after the company said June comps would be 2 to 4 percent rather than the earlier outlook of 4 to 6 percent. Wal-Mart said soft Father’s Day sales and cool weather were to blame. Target, for its part, gave no explanation as to why its June sales failed to materialize. Investors responded by punishing the company’s stock, as its price plunged 6.1 percent to $41.75 from $44.45 a week ago.

Analysts have said in research notes that cooler temperatures and more difficult year-over-year comparisons would dampen June sales, which the majority of retailers will report Thursday.

Companies reporting ahead of the pack last week included Christopher & Banks Corp. and Dress Barn Inc., which delivered same-store sales declines of 8 and 1 percent, respectively, and Guess Inc., which said comps gained an impressive 12.7 percent. Investors reacted predictably: C&B’s stock dipped 0.2 percent to $17.49 from $17.53, Dress Barn shares fell 2.9 percent to $17.27 from $17.79 and shares of Guess advanced 1.7 percent to $16.57 from $16.30.

In addition to consumer confidence and comps, a series of deals and prospective deals shook up index share prices last week.

Sears, Roebuck & Co. saw its stock price plunge 6.7 percent to $36.64 from $39.25 after the company said it is expanding its new off-the-mall store base with the purchase of 54 Kmart Holding Corp. locations in a deal worth $620 million that also includes leasehold interests in seven stores from Wal-Mart. Although other factors, such as uncertainty over June comps, may have factored into investors’ thinking, acquisitions typically include a number of special charges and take some time to be accretive to earnings, which would account for the short-term sell off.

The same concerns were also likely at play when investors traded down Warnaco Group Inc.’s stock 3.8 percent to $21.03 from $21.86 following the news that the company is on the prowl for acquisitions and is eyeing a handful of firms, including Ocean Pacific and Apparel Ventures.

Conversely, as an acquisition target Barneys New York Inc.’s stock shot up 45.7 percent to hit an all time high of $18.50 from $12.70 a week ago after the company said it hired Peter J. Solomon Co. and Morgan Stanley as its financial advisers to explore “strategic alternatives,” including the sale of the storied retailer.

Looking ahead, there is reason to think the WWD Index will only track the performance of the larger market, or even underperform it, for at least the second half of the year. With the economy now having grown for 30 consecutive months, early consumer cyclical stocks such as those found in the WWD Index are coming under increased competition from stocks in other sectors of the economy — especially industrial and manufacturing shares — which are now poised to benefit from economic expansion.

WWDComposite Stock Index vs. S&P 500