NEW YORK — The week on Wall Street was volatile as the Middle East crisis escalated, sending crude oil prices higher. Technology stocks posted disappointing earnings.

The S&P 500 closed the week up slightly by 0.33 percent to 1,240.29 from 1,236.19 a week ago. In the retail sector, the WWD Composite Stock Index ended the week down 0.33 percent to 1,017.40 from 1,020.73 in the previous week.

Moody’s Investors Service cut its ratings on Jones Apparel Group last week, and said another downgrade was possible in the near future. Moody’s cited the company’s higher leverage and poor operating performance as the basis for cutting Jones’ senior long-term debt rating to “Baa3” from “Baa2.”

“Jones’ operating performance and financial leverage are unlikely to recover to levels that would be appropriate for a ‘Baa2’ rating in the near to medium term,” Moody’s said in a statement.

Jones, the owner of the Nine West and Jones New York brands, as well as Barneys New York, said in March that it was considering a sale of the company.

Sara Lee Corp. said that its board of directors approved the capital structure for the planned tax-free spin-off of its apparel business into a separate, publicly traded company called Hanesbrands Inc.

In order to establish the independent company, Hanesbrands will borrow $2.6 billion. Sara Lee will receive a one-time payment of $2.4 billion from the company in connection with the spin-off, which Sara Lee expects to complete by early September, at which point the two will be independent companies. Neither will retain any ownership or interest in the other.

Meanwhile, the mergers and acquisitions front remained.

Istithmar PJSC said that it completed the $300 million acquisition of Loehmann’s Holdings from Atlanta-based Arcapita.

Istithmar, an investment house based in the United Arab Emirates, plans to expand the presence of Loehmann’s by opening a new flagship store on the Upper West Side of Manhattan and increasing the number of stores from 60 to 100.

This story first appeared in the July 24, 2006 issue of WWD. Subscribe Today.

Loehmann’s chief executive officer Robert Friedman said in a statement that the company will “continue to pursue its small store strategy as well as Internet opportunities.”

The transaction establishes Istithmar’s presence in the U.S. retail market, and allows Loehmann’s, an off-price specialty retailer that carries well-known designer and brand name apparel, footwear and accessories, to draw from the firm’s expertise in retail management. Istithmar also owns RetailCorp, which plays an important role in the Middle East retail market.

Mark Montagna, analyst at C.L. King and Associates, kept his “accumulation” rating on Gottschalks but raised his share target price to $10, noting that the retailer “could be an acquisition target.”

He pegged the value of the company’s real estate holdings, which include six department stores, at $116 million.

Finally, Moody’s upgraded J. Crew Operating Corp.‘s ratings after the company’s completion of its initial public offering. The proceeds from this offering, along with the proceeds of the sale of $73.5 million of its common stock to Texas Pacific Group, were used to redeem preferred stock. J. Crew’s corporate family rating was raised from “B2” to “Ba3.” Moody’s said the upgrade reflects the company’s significantly stronger balance sheet and improved credit metrics.

Weekly % Changes
(Ending July 21)
Gainers
Decliners
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Change
 
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Change
Gottschalks
8.20
16.64
Revlon
0.99
-13.91
Bon-Ton
23.29
14.11
Perfumania
12.50
-9.42
Charlotte Russe
24.72
13.29
Tarrant
1.61
-8.52
Hot Topic
13.03
8.13
Dress Barn
21.89
-7.29
Mothers Work
32.72
6.37
Wet Seal
4.22
-6.64
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