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Industry Stocks Scorch in July

The temperature wasn’t the only thing climbing last month: the Dow Jones Industrial Average gained 3.6% in the five weeks ending August 2, its best July in three years, putting the index ahead 21% for the year so far. Industry stocks managed to beat the overall market, with apparel retail issues up 5.7% in the month and 22% so far this year. Wholesalers and manufacturers were ahead by 8.7% in July and 34% year-to-date. The biggest gainers were those involved in takeovers, or whose quarterly earnings delighted investors. The biggest losers included those whose recently announced quarterly earnings disappointed investors or whose slipping margins indicate increased competitive pressure and possible future earnings problems.

Retail Gainers and Losers

Alco Stores (ALCS) soared 27.5% to $14.15 per share after the retailer announced that it had entered into an agreement to be acquired by Argonne Capital Group for $14 per share, or a total of $47 million.

Destination Maternity (DEST) gained 21.7% to $29.93 after announcing that third quarter sales had increased 2.2% over the same period last year, and that earnings would be at the higher end of expectations. The maternity retailer’s board declared a regular quarterly cash dividend of $.1875 per share.

L Brands (LTD) gained 18.6%, to $58.40. The parent company of Victoria’s Secret, formerly known as Limited Brands, announced that same-store sales, unlike its models, were flat in June. Wall Street had expected a 2% increase.

Saks Holdings (SKS) rose 18.3% to $16.14, after it was announced that Hudson’s Bay Company, parent of Lord & Taylor, would buy the luxury retailer for $16 per share in an all cash deal valued at $2.9 billion.

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Body Central (BODY) was the biggest retail loser in July, dropping 39.2% to $8.10 after disappointing second-quarter results marred by fewer customers and heavy discounting. The retailer of trendy women’s clothing posted a loss of $12.8 million, or $.78 per share, and a 5% drop in revenue to $75.2 million. Last year the company posted profit of $3.5 million, or $.21 cents per share.

JC Penney (JCP) lost 16.4% to $14.28, after a report alleged that CIT had abruptly stopped supporting deliveries from smaller manufacturers to Penney stores. Penney dismissed the report as untrue. Regardless, a tremendous amount is riding on a successful back-to-school season for the department store retailer to help get it back on track.

Francesca’s Holdings (FRAN) fell 8.7%, to $25.38, after being downgraded by Wedbush Securities from “outperform” to “neutral” following a lackluster quarter-to-date performance and stagnating margins.

Tilly’s (TLYS) dropped 8.4%, to $14.65 and Cititrends (CTRN) edged down 1.9%, to $14.26, both due to investor concern over slipping gross margins.

Wholesale Gainers and Losers

Maidenform Brands (MFBI) skyrocketed 35.3% to $23.44 on news that the bra and shapewear maker would be acquired by Hanesbrands for $23.50 per share in a cash and debt deal totalling $547 million.

Jones Group (JNY) surged 25.8% to $17.30 after reporting it had hired Citigroup to explore the possibility of a sale. The parent company of Jones New York and Nine West beat both revenue and earnings estimates in the quarter ending July 6, though gross margins shrank.

Hanesbrands (HBI) gained 24% to $63.76, after earnings topped Wall Street expectations. For the quarter  ended June 29, net income rose to $121.6 million, or $1.19 per share, compared to $1.2 million, or $.01  per share, a year earlier, and to analyst expectations of $.92 per share. Revenue edged up less than 2% to $1.19 billion, from $1.18 billion last year. Analysts expected revenue of $1.21 billion. The company, whose brands include Hanes, Champion, Playtex and Wonderbra, agreed last week to acquire bra-maker Maidenform for about $547.6 million. Hanesbrands raised its earnings projection for the year to $3.50 to $3.65 per share from a prior range of $3.25 to $3.40. Analysts expect $3.44 per share.

Delta Galil (DELTY) rose 19.3% to $18.20, after second quarter sales at the global innerwear firm rose 39% and operating income increased 59%. The board declared a dividend of $.1015 per share to be distributed on August 22.

Crocs, Inc. (CROX) dropped 14.7% to $14.07 after the footwear maker’s stock was downgraded by Wedbush Morgan from “outperform” to “neutral.” The company reported it earned $.48 per share on revenue of $364 million, falling short of the $.64 per share on sales of $365 million expected by Wall Street. On top of that, the company’s outlook for the current quarter sharply missed analysts’ expectations.

Coach (COH) fell 6.6% to $53.33, on investor concern that so much of the accessories maker’s growth has come from outlet stores. In addition, it is expected that longtime creative director Reed Krakoff will acquire his namesake brand business from Coach.

Carter’s (CRI) dipped .9% to $73.42 after second-quarter net income slipped 5%, hurt by higher expenses, acquisition-related costs and facility consolidation. Adjusted results topped analysts’ estimates, but revenue fell short of Wall Street’s view. The children’s clothing and accessories company raised its full-year adjusted profit forecast, but it too missed analysts’ expectations.