The Dow rose 2.2% in the four weeks ending March 30, bringing the quarter- and year-to-date gain to over 8%.
Both the retail and wholesale indices beat the broader market for the month, as the industry continued to enjoy a nice rally. Apparel stocks increased by an average of 6% in the five-week period, while wholesale stocks increased by only half that, or almost 3%. In the first quarter of calendar 2012, and on year-to-date basis, wholesale stocks are up almost 20%, while retail lags them, at up only 8%.
The top five performing retail stocks rose primarily due to fourth quarter earnings or first quarter forecasts that exceeded expectations. The losers saw their stock prices fall because of unexpectedly bad earnings guidance or other news.
Bon Ton (BONT) was the top performing retail stock in March, catapulting 93.1% to $9.25 per share. Fourth quarter and full year profit failed to meet expectations, primarily due to unseasonably warm weather. However, the company has a new CEO, Brendan Hoffman, who came to the department store retailer in January from Lord & Taylor. Hoffman projects the retailer will generate $60 to $70 million in free cash flow this year. February same-store sales rose .7%.
Aeropostale (ARO) soared 24% to $21.62 after fourth quarter profits beat analyst estimates. Profit in the three months ending January 28th was $.44 per share adjusted for impairment charges, about 6 cents ahead of consensus, and net income was $26.1 million on sales of $83.8 million. There is speculation that the specialty store chain might be a takeover target. Although the company is pleased with the response to Spring product, it issued a disappointing first-quarter outlook because of higher raw materials costs and a very promotional price environment in its particular segment of teen retail. It expects raw materials costs to be lower in time for the back-to-school season.
American Eagle Outfitters (AEO) leaped 21.4% to $17.19 after reporting a strong start to the Spring season. For the first quarter, the teen retailer expects to earn $.08 to $.10 per share, and feels lower product costs will help margins in the second half of the year. In the near term, however, discount pricing is putting pressure on margins. For the fourth quarter, earnings fell to $51.3 million, or $.26 per share, from $87 million, beating estimates by a penny but falling short of the $.44 per share earned in the year-earlier period. Sales climbed 14% to $1.04 billion.
Shoe Carnival (SCVL) also rose 21.4%, to $32.20. Fourth quarter sales and earnings were in line with revised guidance even though boot sales were slow due to the mild winter, resulting in clearance-induced margin declines. The value footwear retailer announced a three-for-two stock split for shareholders of record as of Friday, April 13, payable on Friday, April 27th.
JCPenney (JCP) was the biggest retail loser in March, plunging 15% to $35.40 after the company warned that its much-talk-about new pricing strategy might hurt sales in the short run. In January, the department store chain announced it was abandoning its high-low pricing and frequent couponing in favor of an everyday low price scheme with two markdowns per month to clear out slow sellers. In its annual report, the retailer said the new strategy could result in a prolonged decline in sales, and that there was no assurance that the plan would yield better results. Although the company stopped reporting monthly sales, many industry-watchers have noticed a steep decline in store traffic, and some have commented that increased sales at Macy’s may be at the expense of Penney.
Steinmart (SMRT) fell 10% to $6.60. Taking a page from the JCPenney book, company executives at this department store retailer announced they are going back to what made them successful by lowering prices on select merchandise, particularly fashion items, while reducing coupon usage. The company reduced coupon use by 20% in 2011 and expects to drop it another 50% in 2012, but not eliminate it entirely. The pullback caused total sales to fall 2.5% to $328.1 million in the fourth quarter, while same-store sales dropped 2.2%.
Finish Line (FINL) lost 9.2% to $21.20 after the athletic footwear retailer forecasted a 30% plunge in first-quarter earnings due to a shift in promotions and higher store occupancy expenses. The company now expects to earn $.21 per share, versus analyst estimates of $.36 per share. In the fourth quarter ended March 3, the company posted earnings of $41.9 million, or $.80 per share, up from $34.2 million, or $.63 per share, a year ago. Sales rose 18.6% to $456.3 million, beating estimates by $23 million.
Sears Holding (SHLD) dipped 3% to $66.30 after a string of bad news apparently failed to assure investors that a successful turnaround is in the works. Dev Mukherjee, who ran the company’s home appliances division, is leaving the company, the third person in that job to depart since 2008. The division, which includes Craftsmen, Kenmore and Diehard brands, is generally viewed as the company’s best remaining asset. Apparel chief John Goodman and Chief Marketing Officer Christine Woo both left in January, the latter after just 5 months on the job. In an SEC filing, the company indicated it plans to close another 53 stores on top of the 120 closures announced in December. In February the department store retailer reported that it lost $2.4 billion in the fourth quarter, while revenue fell 4% to $12.48 billion, missing Wall Street expectations.
In the wholesale sector, the gainers were all apparel stocks. Three of the five biggest losers, interestingly enough, were footwear stocks.
Liz Claiborne (LIZ), which will soon change its name to Fifth and Pacific, saw its stock price soar 32.4% to $13.36, on unsubstantiated rumors that it was in acquisition talks with private equity firms. Fourth quarter net sales fell 12% to $447 million. Excluding the impact of brands that were sold, sales rose 11.5%, and income from continuing operations was $245 million, including the $271 million gain on the sale of the Liz Claiborne and Monet brands to JCPenney and Dana Buchman to Kohl’s. The company named former Tommy Hilfiger executive George Carrara as CFO and COO as it attempts to cut costs as it focuses on remaining Juicy Couture, Lucky Brand and Kate Spade brands. CEO William McComb announced in the quarterly earnings conference call that the company has used the proceeds from the brand sales to pay down debt.
Jones Group (JNY) skyrocketed 31.2% to $12.56, after the company said it was in talks with JCPenney about “a number of initiatives.”
Carter’s (CRI) jumped 14.1% to $49.77. The former president of the company, Joseph Pacifico, was charged with securities fraud for allegedly failing to report massive rebates to customers in financial statements, and then covering up the activity, between November 2006 and July 2009.
Michael Kors Holdings (KORS) gained 12.2% to $46.59. The 30-year-old company, which went public in December, reported that third quarter earnings rose 47% on a sales gain of 83%, and forecasted that fourth quarter revenue would be around $350 million, yielding earnings per share of $.14 to $.16, up from previous guidance of $.10 to $.12 per share. However, it later reported that problems with a new distribution facility might impact deliveries in the short run. The company waived the 180-day lockup restriction on stock selling and offered another $1 billion in stock as a secondary offering, mostly by insiders and early shareholders. Chief Creative Office Michael Kors will reportely sell three million shares in the offering. Half of the fashion company’s business is currently done through department and specialty stores, but it is expanding it’s own retail footprint, and plans to double its North American branded retail store count from 200 to 400. Same-store sales rose 36% in the third quarter ending March 17, and have grown every quarter for the last 5 years.
Deckers Outdoor (DECK) was the worst performing wholesale stock in March, stumbling 18.9% to $63.05. Although fourth quarter and full-year performance at the maker of Uggs and Tevas beat Wall Street estimates, the future looks less rosy. Fourth quarter sales rose 40% to $603.9 million , exceeding expected revenue of $563.1 million. Net income rose to $124.7 million, or $3.18 per share, from $89.2 million, or $2.27 per share, on strong holiday and international sales. Analysts expected earnings per share of $3.13 . The company said annual Ugg sales rose above $1 billion for the first time in 2011. However, higher sheepskin and other costs to eat into its first quarter and full year profit in 2012. In the quarter just ended in March, Deckers expected profit to be down by half, or about $.25 per share. It expects revenue to rise 19 percent, to about $245 million. Analysts were predicting much higher earnings of 63 cents per share on $262.2 million in revenue.
Brown Show (BWS) dropped 15.9% to $9.23, after posting fourth quarter results that were below Wall Street estimates, hurt by weak sales of boots and toning shoes and deep discounting at its Famous Footwear chain. Sales increased 4% to $629 million, short of analyst estimates of $644 million. The company posted a net loss of $8.2 million, or $.21 per share, compared to a profit of $3.4 million, or $.08 per share, a year ago. On an adjusted basis, earnings were $.10 per share, half of analyst expectations.
Guess? (GES) lost 8.3% to $31.25 after the company gave a weak first-quarter forecast due to an expected softening in the European market, which represented 40% of total Guess revenue in the past year. The specialty brand expects sales of between $560 and $575 million, and earnings per share between $.25 and $.28.