Retail stocks fell 1.7 percent Monday, registering their steepest decline in two weeks as a switch in China’s currency policy raised the specter of higher apparel costs.
This story first appeared in the June 22, 2010 issue of WWD. Subscribe Today.
The S&P Retail Index retreated 7.37 points to 424.42 as the Dow Jones Industrial Average held steady, dipping just 8.23 points to 10,442.41.
Retail decliners included The Talbots Inc., down 5.8 percent to $11.43; J. Crew Group, 5 percent to $41.47; Macy’s Inc., 3.4 percent to $20.74, and J.C. Penney Co. Inc., 3 percent to $25.37. Among a small group of advancing stocks was American Apparel Inc., which rose 9.3 percent to $1.89.
Asian markets reacted favorably to indications over the weekend that the yuan would be allowed to float more freely in global currency markets. The Hang Seng Index shot up 3.1 percent to 20,912.18 in Hong Kong, as the SSE Composite Index rose 2.9 percent to 2,586.21 in Shanghai and the Nikkei 225 advanced 2.4 percent to 10,238.01 in Tokyo.
But experts are still debating the importance of China’s move, which U.S. textile producers have long called for, arguing that an artificially low currency gives Chinese producers an unfair advantage. Yuan Gangming of the Chinese Academy of Social Sciences in Beijing said the somewhat vague central bank statement did not guarantee a rise in the currency.
A substantial move in the yuan could hit both Chinese producers and Western consumers as it would make it more expensive to buy goods made in China. “The impact will be very big, as now the profit from textile exports is 7 to 8 percent — less than 10 percent,” said Wang Zilin, sales manager for the Shandong Jiada Textile Co. “The seriousness depends on how much the currency rises. We still don’t know what to do. Maybe we will rely more on the domestic market.”
In Europe, the CAC 40 extended 1.3 percent to 3,736.15 in Paris, as the DAX rose 1.2 percent to 6,292.97 in Frankfurt and the FTSE 100 increased 0.9 percent to 5,299.11 in London.
• Jos. A. Bank Declares Dividend: Jos. A. Bank Clothiers Inc. has declared a 50 percent stock dividend that will take the form of a 3-for-2 stock split payable on Aug. 18 to shareholders of record July 30. Shareholders will receive one additional share of common stock for every two shares owned, increasing the number of outstanding shares to about 27.5 million from about 18.4 million. Cash will be paid in lieu of fractional shares. Neal Black, president and chief executive officer, said the move “will enhance the company’s liquidity by making our common shares available to more investors.