FASHION ISSUES GET A REMINDER THAT PRICES CAN TUMBLE, TOO
NEW YORK — The powerful stock market plunge pulled some high-flying luxury fashion firms closer to earth Friday.
Spooked by better-than-expected unemployment figures, the market reacted with a 171.25-point slump in the Dow Jones Industrial Average, the third-largest drop in points ever but not even in the top 100 on a percentage basis.
Gucci, Estee Lauder Cos. and Revlon — each of which had been cruising with practiced ease since making their public bows — all got rude shocks, along with almost every other issue on the New York Stock Exchange.
Gucci stock, which has been soaring since it went public last October at $22 a share, slumped 3 points to 43. Estee Lauder, another relatively new issue that hit the market in November at 24, gave up 7/8 to close at 36. Revlon, priced at 24 at the end of February and traded as high as 29 1/2 on its first day out, gave up 1 1/2 in the downturn Friday to close at 26 3/8.
The success of those issues has been providing encouragement to other fashion companies to come to market. As reported, Saks Fifth Avenue and Donna Karan Corp. are said to be preparing to tap the well with initial public offerings.
However, if Friday’s market actions turns into a long-term pattern instead of a quickly reversible bump, investors may lose their enthusiasm for new fashion issues.
In large part, what drove the stock market down was something that would normally be considered good news — a February drop in the unemployment rate to 5.5 percent from 5.8 percent. Those figures were interpreted on Wall Street as nearly disastrous. One news wire report referred to the unemployment statistics as “shocking.”
The theory that took its toll on stock prices is that strong employment figures will lead to strong demand for goods, which will lead to inflation which will lead to higher interest rates. And the market hates higher interest rates.
Other fashion stocks taking hits in Friday’s debacle were Jones Apparel Group, off 1 1/8 to 43 5/8; Liz Claiborne, 1/2 to 34 1/2, and Warnaco, 7/8 to 25 1/8.
However, St. John Knits, which last week reported earnings well above Wall Street’s expectations, managed to gain 3/8 to 61 3/8.
Retailers did not escape unscathed.
The casualties included Dayton Hudson, which dropped 2 3/8 to 77 1/4; J. C. Penney, off 1 1/4 to 48 1/2; May Department Stores, 1 7/8 to 48 1/8; Sears Roebuck & Co., 1 7/8 to 45 7/8; Nordstrom, 1 1/8 to 46 7/8; Dillard’s, 7/8 to 32 3/4; Federated Department Stores, 5/8 to 32 1/8; The Gap, 1/2 to 52 3/4; Neiman Marcus Group, 1/2 to 20 1/2, and Wal-Mart Stores, 3/4 to 21 7/8.
Kmart Corp. stock was among the New York Stock Exchange’s most active issues, dropping 1/4 to 7 3/4. Kmart figures reported Thursday, while showing heavy losses because of special items, were regarded by some analysts as signaling a possible turnaround.