’95 STOCK MARKET BOOM SKIPPED MOST FASHION; ’96 OUTLOOK NO BRIGHTER
NEW YORK — While some fashion issues flourished along with the stock market in 1995, the majority floundered.
Wall Street analysts are generally gloomy about the prospects for retail and apparel stocks in 1996, largely due to ongoing concerns about overstoring in an expected slow-growth climate for apparel.
The WWD Stock Index did manage a 13.1 percent gain in 1995, but decliners on the index outnumbered advancers, 37 to 27.
Moreover, the WWD Stock Index sharply underperformed the 33.5 percent gain in the Dow Jones Industrial Average, marking the third straight year of sluggish performance by fashion stocks. The WWD index tumbled 14.4 percent in 1994 and was off 7.5 percent in 1993.
Among those firms losing more than half their stock value were Ann Taylor Stores, Hills Stores, Bon-Ton Stores, Charming Shoppes, Venture Stores, Caldor Corp. and Bradlees Inc. Price declines of more than 40 percent were suffered by Kmart Corp., Chic by HIS, Phillips-Van Heusen, and Filene’s Basement. Those whose prices fell by more than 25 percent included Galey & Lord, Norton McNaughton, Bernard Chaus, Gottschalk’s, Spiegel, Farah and Salant.
Nonetheless, there were many big winners, particularly among the larger firms that are benefiting from the consolidations or those capitalizing on hot brands. This helped the WWD index show its overall gain.
Winners included Tommy Hilfiger Inc., surging 87.8 percent to 42 3/8, and St. John Knits Inc., vaulting 85.6 percent to 53 1/8. Both benefited from stellar earnings. Other big gains were notched by Liz Claiborne, Jones Apparel Group, Neiman Marcus Group, Sears, and Ross Stores — each jumping more than 50 percent. Warnaco Group, The Gap Inc., and Federated Department Stores all advanced more than 35 percent.
Easy comparisons, lower interest rates and cheap prices relative to the rest of the market, could lead to some pickup in early 1996, analysts say. However, because of internal problems facing the apparel industry, most analysts remain neutral to negative on the apparel and retail industry for the long term.
In its 1996 forecast, Morgan Stanley said issues pressing retailers in 1995 — consolidation, consumer demands for cheap prices, and negative demographic trends — “are likely to intensify in 1996, widening the gulf between the strong and weak players.”
Dana Elsman Cohen, an analyst at Donaldson, Lufkin & Jenrette, said significant square footage growth reduction is needed, and called a dismal Christmas 1995 and continued weakness through spring 1996 “the best scenario for the industry long-term” because it may accelerate store closings. She said this could set the stage for potential industry improvement by late 1996 or 1997.
“There’s a general sense of pessimism about the industry,” said Howard Eilenberg, an analyst at Johnson Redbook Service. “Somewhere along the line its going to pick up, but we’ve been waiting a long time.”
While analysts remain cool to the overall industry prospects, they also expect select stocks to do well despite the tough retail climate. In general, analysts expect the dominant retailers who are benefiting from the consolidations to continue to do well, while secondary retailers remain under pressure. Retailers that in some way have been able to differentiate themselves through unique concepts, establishing strong brand names or reaching an underserved target customer could also do well.
On the apparel side, strong branded firms should perform favorably, as well as larger firms that are able to best work with the major retailers as the consolidations in that sector continue.
Among the retail categories on the WWD index, both the specialty apparel stores and discounters lost value last year. Apparel specialty stores and discounters both grew rapidly in the Eighties and early Nineties, but last year marked the beginning of their expected consolidations, with bankruptcy filings, store closings and drastically slowed expansion plans.
The specialty apparel group declined 5.2 percent. Ann Taylor Stores tumbled 69.8 percent to 10 3/8 while reporting steep losses in the nine months. Charming Shoppes, which announced a $65 million store-closing program in order to reverse its losses, fell 56.6 percent to 2 7/8. Edison Bros. collapsed to 2 from 18 1/2, and Petrie Stores slid to 2 3/4 from 4 3/8. Both chains filed Chapter 11 bankruptcy petitions last year. Spiegel Inc. fell 3 1/4 points to 6 7/8, and American Eagle Outfitters Inc. dropped to 5 7/8 from 13 1/4 — both hit by losses.
The Limited Inc. shed 5.5 percent to 17 1/8 despite announcing a program to sell parts of its business in a bid to increase the company’s stock value. The Limited continued to struggle to turn around its women’s businesses. Woolworth Corp., in a midst of a restructuring, was off 2 to 13.
Talbots Inc., which suffered a weakening of sales and earnings trends in the second half, gave back 2 1/2 points to 28 3/4. On the upside, Neiman Marcus Group vaulted to 22 1/2 from 13 1/2, and Tiffany & Co. leaped to 50 3/8 from 39. Both retailers racked up good earnings gains, boosted by strength in demand for high-end goods. The Gap Inc. rose to 42 from 30 1/2 on improved earnings and potential long-term benefit of its new Old Navy concept.
The discount group fell 2.3 percent. Bradlees Inc., which filed a Chapter 11 petition in June, dropped to 1 1/8 from 11 5/8, and Caldor Corp., which filed in September, to 3 1/4 from 22 1/4. Kmart Corp., whose new management team spent much of year fighting off speculation of a Chapter 11 filing, fell to 7 1/8 from 13. Venture Stores sank to 3 3/8 from 11 5/8, and Pamida Holdings, to 3 1/8 from 5 5/8.
Hills Stores Inc. slid to 9 7/8 from 20 3/4. A hostile takeover attempt by Dickstein Partners led to the resignations of Hills’ top executives and their resulting huge severance packages.
Going the other way, Wal-Mart limped ahead 1 to 22 1/4, and Family Dollar Stores nudged up 1 1/4 to 13 3/4.
Department stores were the top-performing group, rising 38.9 percent. Analysts said price reductions at department stores made available through consolidations have helped them gain market share.
Sears surged 71.4 percent to 39 while reporting strong earnings gains. Federated, which acquired R.H. Macy and Broadway Stores last year, rose 41.6 percent to 27 1/4.
Other gainers included Kohl’s, 32.1 percent to 52 1/2, May Department Stores Inc., 24.8 percent to 42 1/8, and Mercantile Stores Co., 17.1 percent to 46 1/4.
Younkers surged 47.1 percent to 25 3/8. The Des Moines, Iowa-based department store chain, which had been fighting off a hostile takeover attempt by Carson Pirie Scott & Co., agreed to merge with Proffitt’s Inc. in an exchange-of-stock transaction valued at $253 million. The deal is expected to close in early 1996.
Meanwhile, Carson Pirie Scott, J.C. Penney Co., Dayton Hudson Corp., Dillard Department Stores, and Strawbridge & Clothier all recorded modest single-digit gains. Bon-Ton Stores Inc. fell 54 percent to 5 and Gottschalk’s shed 28.8 percent to 5 1/4 while each were in the red in the nine months.
The off-price group moved ahead 9.9 percent as gains by TJX Cos., Ross Stores and Syms more than offset declines at Value City, Burlington Coat Factory Warehouse Corp., and Filene’s Basement Corp.
Meanwhile, the apparel manufacturers group moved up 9.7 percent, with many spectacular gains in the group. St. John Knits rose to 53 1/8 from 28 5/8; Jones Apparel Group, to 39 3/8 from 25 3/4; Liz Claiborne, 27 1/2 from 17; Tommy Hilfiger Corp., 42 3/8 from 22 1/2; The Warnaco Group, 25 from 17 1/4. VF Corp. rose to 52 3/4 from 48 5/8.
Among other stars: Fila Holdings, rising to 45 1/2 from 19 3/4; Donnkenny, to 18 1/8 from 7 1/2; Nautica Enterprises Inc., to 43 3/4 from 30 1/4; Authentic Fitness Corp., to 20 3/4 from 13 7/8; and Nike Inc., to 69 5/8 from 37 1/4.
The textile group fell 5.2 percent although Burlington Industries and Springs Industries managed gains. Decliners included Delta Woodside, 42.4 percent, Dixie Yarns, 44.6 percent, Galey & Lord Inc., 25.2 percent, Thomaston Mills, 19.8 percent, Unifi, 12.8 percent and Guilford Mills, 8.4 percent. — Fairchild News Service