Retail stocks slid 1.4 percent on Tuesday, as Target Corp. and The TJX Cos. Inc. took a cautious stance toward the holiday season even as they posted improved third-quarter profits compared with a year ago.

This story first appeared in the November 18, 2009 issue of WWD. Subscribe Today.

The S&P Retail Index fell 5.64 points to 404.23. The Dow Jones Industrial Average gained for the third consecutive day, rising 0.3 percent, or 30.46 points, to 10,437.42, the highest level in 13 months. Shares of Target dropped 3 percent to $48.77 and TJX dipped 1.5 percent to $38.91.

Pacific Sunwear of California Inc. took the biggest hit, a 22.6 percent drop, to $3.88. After the close of the markets Monday, the retailer posted third-quarter losses of $10.9 million and said it would close as many as 150 doors over three years.

Among the other retail stocks that lost ground were American Eagle Outfitters Inc., 4.5 percent to $15.42; Coach Inc., 4.2 percent to $34.48; J.C. Penney Co. Inc., 4 percent to $29.86; Macy’s Inc., 2.9 percent to $17.64, and Gap Inc., 0.8 percent to $22.31.

Saks Inc. and Dillard’s Inc. ran counter to the trend after returning to the black for the third quarter. Saks rose 4.1 percent to $6.67 and Dillard’s advanced 8.9 percent to $14.51.

Mall-based stores are gearing up for the holidays with sales and other promotions, but so far shoppers appear reluctant to spend.

“In what appears to be the formation of a new trend, retailers are opting to bring out the sales and promotions in the weeks leading up to Black Friday,” said Adrienne Tennant, an analyst at FBR Capital Markets. “So far, early November sales and traffic have been soft, as consumers wait to spend over the critical Black Friday weekend.”

Tennant said Gap, Banana Republic and Old Navy, all under the Gap Inc. umbrella, were driving strong customer traffic.

“While we are convinced of the Old Navy turn, we are less convinced that the Gap division’s product is compelling enough to create a longer-term turnaround,” she said.

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