NEW YORK — A rise in the unemployment rate Friday had investors thinking that the Federal Reserve might not raise interest rates too sharply or swiftly.

As a result, stocks rallied, but it was not enough to erase prior losses. The S&P 500 closed the week down 0.4 percent, to 1,281.58 from 1,287.23 in the prior week, while the WWD Composite Stock Index fell 0.2 percent, to 1,108.80 from 1,111.34.

On the retail front, several specialty retailers reported strong sales and earnings. However, one retailer, Urban Outfitters, which posted fourth-quarter profits that soared 31.5 percent, warned of challenges this year because of “a tectonic shift” in fashion trends late last year that has gripped its business.

Richard A. Hayne, chairman and president of the retailer, described the change as radical, one that affects “every aspect of [the female shopper’s] wardrobe.” But he said the retailer expects “overall business to improve slowly as the look becomes better defined and accepted.” The changing fashion includes a more fitted look.

Goldman Sachs analyst Margaret Mager said in a research note that “until the consumer moves in the same fashion direction as Urban Outfitters, sales and margins will be under pressure, suggesting additional [earnings] estimate risk. While the stock trades at a more attractive valuation today, the recent difficulties are a reminder that no fashion retailer is immune to missteps, and suggests the stock will not regain its previous valuation.”

At Ann Taylor Stores Corp., the fourth-quarter profit was a reverse of last year’s quarterly loss and even beat Wall Street’s consensus expectations. The women’s specialty retailer posted a profit of $27.4 million, or 38 cents a share, against the year-ago loss of $12.5 million, or 18 cents. Excluding special items, earnings per share were 43 cents, which beat Wall Street analysts’ estimate of 40 cents. Sales during the quarter rose 17.8 percent, to $574 million from $487.3 million. Same-store sales gained 6.8 percent, compared with a 4 percent decline a year ago.

Aéropostale Inc.‘s fourth-quarter net income leapt 18.4 percent, to $41.8 million, or 76 cents a diluted share, from $35.3 million, or 62 cents, in the prior period, on sales that soared 33.1 percent, to $435.2 million. Comps for the quarter showed a gain of 10.3 percent.

This story first appeared in the March 13, 2006 issue of WWD. Subscribe Today.

Weekly % Changes
(Ending March 10)
Gainers
Decliners
Close Change   Close Change
New York & Co.
15.75
13.15
Revlon
3.00
-15.01
Inter Parfums
18.93
9.80
Urban Outfitters
25.15
-7.20
G-III
17.35
8.67
Movado
20.41
-6.93
Aéropostale
30.30
6.54
True Religion
20.36
-6.82
Stein Mart
17.10
6.28
Caché
16.50
-6.67
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