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Retail Apparel Stocks Underperform Market in October

The approximately 100 U.S. industry stocks tracked by Sourcing Journal saw their average prices fall by a collective .8% in October, underperforming the Dow Jones Industrial Average, which advanced by 2 percent.

Sears Holdings (SHLD), Belk (BLKIB), Zumiez (ZUMZ), and Steinmart (SMRT) were among the best performing retail apparel stocks in the month, while Christopher & Banks (CBK), JCPenney (JCP), Cabela’s (CAB), Francesca’s Holdings (FRAN) and Urban Inc. (URBN) were some of the worst.

Sears Holdings (SHLD) gained 32.2%, to $33.35, improving its year-to-date loss to 27.8%. The company announced it would raise $380 million by selling its 51% stake in Sears Canada through a rights issue. CEO of its Sears Canada division, Douglas Campbell, announced his intention to leave the company by the end of the year, putting an end to the turnaround attempt he had begun. The company’s Kmart unit was reportedly hit with a data breach that might have resulting in the hacking of customer credit and debit card data. Sears announced it would rent space to trendy UK brand Primark in seven Northeastern U.S. locations. The company also approved a rights offering allowing its stockholders to purchase up to $625 million in aggregate principal amount of 8 percent secured notes due 2019. It refuted, however, rumours that it was closing 116 Sears and Kmart stores resulting in the layoffs of more than 5,000 workers.

Zumiez (ZUMZ) saw its stock increase by 19 percent, to $33.45, up almost 28 percent for the year so far, after the retailer announced that thanks to a great back-to-school showing, September same-store sales rose by  6.6%, much higher than the 2.7% expected by analysts. Total sales soared by 12.5% to $66.3 million.

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Steinmart (SMRT) jumped 15.3% to $13.31, an almost 4 percent year-to-date drop. The off-price retailer reported total sales for September of $119.4 million, a 6.5% increase over the same period in the prior year. Comps gained 4.9%.

Christopher & Banks (CBK) was the biggest loser in October, plummeting 35.5% to $6.38, a more than 28 percent drop for the year so far, after the Minneapolis-based specialty retailer cut its third-quarter outlook. Christopher & Banks now expects third-quarter revenue between $114 million and $118 million, down from its previous prediction of revenue between $122 million and $124 million. Analysts were expecting third-quarter revenue of $124 million,

JCPenney (JCP) was the second biggest loser in the month, plunging 24.8% to $7.56, a more than 16 percent drop for the year so far, on skepticism about whether the department store retailer’s turnaround plan was working. At its Investor Day on October 8, it cut its third-quarter sales forecast based on weaker-than-expected September results, declining store traffic, and reduced conversion rates, which caused investor pessimism about Holiday sales. However, progress over the past year and a half on growth initiatives caused Zacks to upgrade its rating on the stock to a Strong Buy. The biggest news in the month, however, was the naming of Marvin Ellison, chief of Home Depot’s U.S. stores, as CEO-designate. Ellison will become president of JCPenney this month and replace Mike Ullman as CEO in August 2015.

Cabela’s (CAB) dropped 18.7% in the quarter, to $47.86, a 27.1% drop for the year so far, after the outdoor retailer missed third-quarter estimates for earnings and revenue. Revenue was $886 million, compared to Wall Street expectations of $926.5 million. Net income was $53.8 million, or $.75 per share. Analyst consensus was $.86 per share.

Francesca’s Holdings (FRAN) fell 17.7% to $11.47, a 37.4% year-to-date decline after a slew of stock downgrades including from Canaccord, Macquarie and Wedbush.

Urban Inc. (URBN) plunged 16.9% to $30.49, an almost 18 percent decline for the first ten months of the year, after the company warned in a news release that sales at its flagship brand have continued to fall in the current period and will negatively impact third quarter comparable store sales and profit results.

More leaders and laggards are shown in the chart below.