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Industry Stocks Slide in August on Earnings Misses

Despite encouraging economic news throughout the month, the Dow Jones Industrial Average lost 5.4% in the four weeks ending August 30, ending the month at under 15,000 and reducing its year-to-date gain to 14.5%.

Apparel retail stocks fell by 7.6%, cutting their eight-month gain to 12.9%, while apparel manufacturer stocks declined by only 4.6% for the month, beating the Dow, thanks to the performance of a few stellar stocks.

Worse-than-expected second-quarter earnings at key retailers were the biggest drag on industry stock performance, while concerns over a possible military strike against Syria served to temper  investor enthusiasm in the overall market as well.

Here’s how the top gainers and losers in both the apparel retailer and manufacturer categories did in the month:

Retailers

Cititrends (CTRN) gained 13.8% to $16.23 per share after the retailer announced a loss of $5.5 million, or $.37 per share, better than the expected $.42 per share loss expected by Wall Street. Total revenue increased 4.2% in the period to $137.8 million, and same-store sales were up 1.7%.

Cache (CACH) advanced 13.4% to $4.99. The specialty retailer reported a loss of $.12 per share, meeting Wall Street expectations, but beat revenue estimates by a million. The company announced that Anthony F. Di Pippa, formerly CFO of W. B. Mason, the office products and furniture company, would join the company as CFO, replacing Margaret Feeney, who resigned.

DSW (DSW) gained 11.8%, to $86.09. Quarterly sales rose 9.7% at the footwear retailer, to $562 million, more than the $560 million expected by analysts. Comps were up by 4.4%.  Net income in the period was $33.7 million, or $.73 per share, comfortably exceeding expectations. The company recently began offering luxury brands, which it hopes will further stimulate sales growth, and plans to implement a 2-for-1 stock split.

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Alco Stores (ALCS) rose 3.2% to $14.60, after it was announced on August 15 that the company had received a $14.30 takeover bid from its largest shareholder, Everbright Development Overseas Ltd, that was higher than the $14 per share bid it had previously agreed to from Argonne Capital. The prior deal stipulated that the retailer could solicit alternative proposals through August 23.

Ann Inc. (ANN) edged up 1.3% to $34.70, after the parent of Ann Taylor and Loft became one of the few retailers posting strong quarterly results. Comps rose 2.8%, their first increase in three quarters, and were strong at both Loft and Ann Taylor stores. Sales for the three-month period were up 7% to $638.2 million, in line with the $639 million predicated by analysts. Net income was $35.6 million, or $.76 cents a share, compared with a year-earlier profit of $30.7 million, or $.63 cents. The results topped average analyst estimates of $.65. The company approved a $250 million share buyback program, and the stock was upgrade by Janney from “neutral” to “buy.”

Aeropostale (ARO) plummeted 45.3% to $8.13, after the teen specialty retailer reported quarterly performance results that were, to put it mildly, disappointing. The second-quarter loss per share of $.43 was much worse than last year’s break-even performance, and trailed consensus estimates, largely due to a gross margin collapse of 740 basis points, to 17.9%. Comps fell 6.4%. To make matters worse, the company revised its third-quarter and full-year earnings guidance downward, and said it expected to lose between $.21 and $.26 per share. Analysts expect a full-year loss in the neighborhood of $.55 per share.  Zacks downgraded the stock to “strong sell.” Ouch.

BonTon Stores (BONT) plunged 40.9%, to $11.01, on news that the department store retailer, in the middle of what it had hoped would be a turnaround, had sustained a bigger-than-expected quarterly loss on weak sales and sluggish store traffic. Total sales fell 6% to $557.1 million, with comps down 6.4%, resulting in a loss of $37.3 million, or $1.95 per share, better than last year’s $45 million loss but worse than the expected $1.38 per share. Third-quarter and full-year guidance have been adjusted down.

Abercrombie and Fitch (ANF) dove 31.8%, to $35.31 after the company bared all in its second quarter financials. Net income was $11.4 million, or $.14 per share, down 33% from the prior year’s period, on a sales decline of 1% to $945.7 million. Analysts had expected earnings per share of $.28.  U.S. sales fell 8%, while international sales rose 15%. Comps fell 10%.  The retailer warned that back-to-school sales would be weaker than hoped for.

American Eagle Outfitters (AEO) dropped 27.8% to $14.47, as open season on teen specialty chains seemed to continue unabated. Revenue fell 2% to $727 million, comps dove 7%, and net income was $19.6 million, or $.10 per share, slightly ahead of last year’s $.09 per share, but less than half the $.21 per share expected by analysts. The company blamed much of the weakness on merchandise missteps in women’s and the highly promotional retail environment.

Stage Stores (SSI) dropped 26.1% to $18.63, after the operator of Bealls, Goody’s, Palais Royal and other regional department stores in small- and medium-sized markets reported second-quarter earnings that missed Wall Street expectations. The company earned $9.6 million, or $.29 per share, in the quarter, down 18% from the $11.7 million, or $.37 per share, earned in the prior year period. Revenue climbed 3% to $395.3 million. Analysts predicted earnings of $.46 per share on $402.4 million in revenue.

Manufacturers

Skechers (SKX) was the top performing manufacturer stock in August, gaining 11% to $30.73. Zacks upgraded the footwear maker’s stock to “outperform” on the stronger-than-expected quarterly results that were posted in July. The stock hit a new 52-week high in August.

Michael Kors (KORS) rose 7.7% to $74.09, and hit a new 52-week high in the month after reporting first-quarter results that blew past expectations. Revenue increased 54.5% to $640.9 million, with retail sales up 51.1% to $325.7 million, comps ahead by a staggering 27.3%, and net income skyrocketing to $125 million, or $.61 per share, exceeding predictions of $.48 per share. The company opened 75 new stores in the period, but its wholesale business surged by 59% to $291 million as well. The stock price has increased by over 50% so far this year.

UnderArmour (UA) gained 5.1% to $72.64 in August, a new 52-week high. In July the activewear maker posted better-than expected sales and earnings for the second quarter, and raised its third-quarter guidance.

Genesco (GCO) lost 14.9% to $61.68, after the footwear maker and parent company of Journeys and Lids stores announced that second-quarter results would be below expectations, and slashed its full-year profit guidance. Quarterly net income is now expected to rise to $12.1 million, or $.52 per share, from $10.6 million, or $.44 per share a year ago, well shy of analyst expectations of $.60 per share. The full-year net earnings-per-share forecast was cut to $5.20 from more than $5.50 per share.

Polo Ralph Lauren (RL) fell 12%, to $165.41, despite beating earnings estimates by a penny. Net income fell 4.4% to $181 million, or $1.94 per share, on a 4% revenue gain of $1.653 billion, just shy of analyst expectations of $1.656 billion.  North American sales and profit gains were almost entirely mitigated by a retrenchment overseas. Ralph Lauren’s son David Lauren was elected to the company’s Board of Directors.