NEW YORK — The WWD Composite Stock Index was clawed by the bears in 2005 as investors dumped shares of apparel vendors following a year of retail consolidations.
As a result, the index finished the year down 4.9 percent to 1,113.27, which compares with a 3 percent increase for the S&P 500.
Still, there were robust gains made by several companies. Topping the list of winners were United Retail Group, Guess and Dress Barn, which rose 203, 197.2 and 120.5 percent, respectively. The companies that posted the steepest declines were Tarrant Apparel Group, Bluefly Inc. and Harold’s Stores Inc., which fell 55.1, 49.6 and 33.1 percent, respectively.
Overall, the companies that make up the WWD stock index had a tough year as far as stock valuations go. Other decliners included Kellwood Co., down 28.6 percent, and Russell Corp., off 29.9 percent, as well as several of the top beauty firms, which were hurt by the $17 billion merger between Federated Department Stores Inc. and May Department Stores Co.
The index was mostly dragged down by the vendor component, which fell 18.1 percent, while the retail side of the index was off just 2.6 percent.
The 4.9 percent fall of the WWD Composite Stock Index, which is composed of U.S.-based companies, is in stark contrast to a prior report in WWD that tracked shares of European luxury firms along with the most analyzed stocks on Wall Street. On average, these stocks rose more than 19.5 percent, and included firms such as Hermès International, Tod’s SpA and LVMH Moët Hennessy Louis Vuitton.
The top performers in the WWD index can be best described as Wall Street “sleepers.”
Charlotte Russe, for example, watched the value of its shares rise 107 percent by delivering consistent results. The retailer was able to increase its operating profits while also pumping up its gross margin rate, which is something investors crave in a retailer.
Meanwhile, United Retail Group and its plus-size Avenue nameplate was repositioned in the market over the past year via new merchandising strategies. For the trailing 12 months ended Oct. 29, the retailer’s total revenue was up about 9 percent, while its gross margin rate was up more than 450 basis points from the same period in the prior 12 months. Net income and operating profits went from losses to gains during the same time.
Driving shares of Guess in 2005 were strong sales in its licensing and denim businesses, particularly in the back half of the year. Los Angeles-based Guess (see related story, page 17) saw its same-store sales surge in the double digits each month from September through December. The company’s profits jumped 75 percent year-over-year in the most recent third quarter, and, in turn, the stock jumped well over 100 percent from July through December alone.
Another top performer was True Religion Apparel Inc., which watched its shares rise more than 94 percent.
Shares of Los Angeles-based True Religion, which started trading on the Nasdaq in August, nearly doubled in 2005, thanks mainly to demand for its premium denim. Earnings soared more than eightfold in the latest quarter to $7.7 million, while revenues jumped to $35 million from $7.4 million. But the company, which went public in mid-2003, isn’t resting on its laurels. It opened its first retail store in Manhattan Beach, Calif., in December and three more stores are planned for this year. True Religion also wants to grow internationally into Latin America, Central America and Eastern Europe; international markets already make up about half of the company’s sales and are particularly strong in Japan.
Also driving stock valuations up — and down — in 2005 was a flurry of mergers and acquisitions as well as speculation on several deals, such as the breakup of Saks Inc. and the sale of Tommy Hilfiger Corp.
Shares of Burlington Coat Factory moved for similar reasons. The stock rose out of the $20 range in mid-2005 for the first time in at least five years, surging about 47 percent from May to July, primarily due to reports that the off-price brand-name retailer was exploring “strategic alternatives.” And the shares are still sitting near an all-time high, despite uneven earnings and sales performance. In the latest second quarter, the company posted earnings that rose 9 percent to $45.4 million, as sales increased 8.4 percent to $945.4 million. But in the first quarter, the company posted a nearly $16 million net loss.