The Dow Jones Industrial Average rose 3.5% in March, bringing its year-to-date increase to over 19%. Much of the gains were due to optimism regarding overall economic growth. Retail stocks lagged the overall market, however, gaining only 2.3% in the month, but have still managed to turn in a 16.5% gain for the year so far. The wholesale and manufacturing index jumped by 3.3%, bringing the year-to-date gain to over 30%.
Retail Gainers and Losers
Hot Topic (HOTT) was the top performing retail stock in March, jumping 28.2% to $13.88 per share, after it was announced that private equity firm Sycamore partners would take the teen apparel retailer private in a $600 million deal. Sycamore, which acquired women’s specialty retailer Talbot’s last year, will pay $14 per share in cash for the music- and Goth-inspired apparel retailer.
Bon-Ton Stores (BONT) gained 21.2% to $13.00 in March, after fourth-quarter earnings at the department store retailer beat Wall Street expectations. Revenue rose 3.2% to over $1 billion, missing expectations slightly. Net income was $94.4 million, or $3.71 per share which, though lower than last year, beat the average analyst consensus of $3.57. The company, which is in the middle of a turnaround, has been working to improve marketing, merchandise mix, and inventory management, and expects same-store sales growth and earnings to improve this year.
Men’s Wearhouse (MW) gained 19.9% to $33.42 after the company revealed plans to explore a sale of its struggling K&G business and announced a $200 million share buyback program, both of which perked up investors after a weaker-than-expected fourth quarter. The men’s clothing retailer lost $3.4 million, or $.07 per share, compared to a loss of $3.8 million in the prior year period. Revenue rose 8.2% to $608.4 million. Analysts had been expecting a loss of $.05 per share on sales of $610 million. The specialty men’s clothing chain has named Jon W. Kimmins as its new CFO. Kimmins takes over the role from interim CFO Diana Wilson, who will continue as EVP of finance and accounting. Wilson assumed the temporary position after former CFO Neill Davis left the company to become president of Francesca’s Holdings.
Cabela’s (CAB) gained 19.4%, to $60.78, after the outdoor retailer said it expects to top Wall Street’s first-quarter estimates, thanks in part to projected increases in direct revenue and same-store sales. The retailer, which sells hunting, fishing, camping and related outdoor merchandise, anticipates per-share earnings will be $.10 – $.15 above current consensus estimates of $.46 cents for the current quarter. The company insists that all of its merchandise categories are enjoying increases, in case anyone might be foolish enough to think that gun sales are responsible for the gains.
JCPenney (JCP) was the biggest retail loser for month, dropping another 14.6% to $15.10. Who needs reality TV when there’s such drama unfolding in the retail business? First, there was the legal tussle between Macy’s and JCPenney over the Martha Stewart home goods business. Key players, including the domestic doyenne herself, testified in court during a non-jury trial which was described in great detail in the media before the warring factions repaired to the arbitration table. Then the beleaguered department store laid off another 2,200 employees in its stores and district offices, bringing the total let go since new CEO Ron Johnson’s arrival to over 21,000. Former JCP CEO Allen Questrom reportedly said that Johnson’s plan to recreate the legendary retailer “isn’t going to work.” Ouch. Late in the month there were also rumors that Johnson would resign, or be oustered by the JCPenney board. By month end however, reports of a successful launch of the popular Joe Fresh apparel brand in the stores and hints that price promotions might return in some form helped perk up the stock a bit.
Gordman’s (GMAN) was the second biggest retail loser, dropping 12.9% to $11.70 despite delivering a fourth-quarter profit that beat Wall Street’s expectations but missed the revenue expectation due to a 4% drop in same-store sales. Analysts have revised downward their earnings per share estimates for the next quarter.
Coldwater Creek (CWTR) fell 12.5% to $3.16 as the women’s specialty retailer’s fourth-quarter results topped analysts’ estimates. The company reported an adjusted loss of $.65 per share on revenue of $220.8 million, compared to an expected a loss of $.79 per share on revenue of $218.8 million. Same-store sales rose 2.7% in the quarter.
American Eagle Outfitters (AEOS) lost 10% to $18.70, despite an 85% surge in fourth-quarter profits, an increase in its dividend, and the announcement of a new stock buyback program. The culprit? Weak adjusted earnings and tepid quarterly guidance disappointed investors. So the teen retailer’s finding out that investors can be just as hard to please as adolescents.
Lululemon Athletica (LULU) dipped 7.6% to $62.35. The heretofore infallible company made an announcement on March 18th that rocked the yogawear world: It was recalling its black luon pants due to — take a deep yoga breath here — excessive sheerness. You heard me. When women bend over in these pants, a little too much is revealed. The style represents about 17% of the brand’s pant sales, so this will create a significant product shortage and negatively impact this quarter’s, um, bottom line.
In an unrelated story, the number of men signing up for yoga classes in the US and Canada has surged in the past two weeks.
Wholesale Gainers and Losers
Unifi (UFI) rose 21.7% in March, after an over 35% gain in February, and finished the month at $19.10, as investors continue to be impressed by its revenue growth, cash flow from operations, and net income increases.
Decker’s Outdoor (DECK) gained 19.5% to $55.69, thanks to plunging sheepskin prices. Jeffries increased its price target to $100 from $65, because they feel that declining costs in the key raw material used to make Decker’s UGGs will more than offset the pummeling the boots have received in the footwear market as riding boots and other popular styles have eroded its market share.
Phillips-Van Heusen (PVH) plummeted 12.5% to $106.81. Fourth quarter revenue increased 6.7% to $1.6 billion and surpassed estimates. Adjusted earnings per share rose 34% to $1.60, beating the company’s own guidance of $1.48. However, strong sales growth in the Tommy Hilfiger and Calvin Klein segments was somewhat offset by a decline in sales of its heritage brands such as Arrow, Van Heusen and Bass, and by the negative impact from exiting the Izod and Timberland businesses. Also, the company now projects synergies from the newly acquired Warnaco businesses to be $25 million this year instead of the $50 million expected earlier. The Warnaco acquisition is expected to dilute PVH Corp.’s current year earnings by $.25 per share.
Maidenform Brands (MFB) plunged 9.3% to $17.53. The maker of bras and other underwear saw sales grow 8.5% in the fourth quarter, to $135.1 million, slightly ahead of analyst estimates. Earnings of $0.22 per share were below expectations. For the current quarter, management expects a per-share loss of between $0.05 and $0.10 per share, also below estimates.
Michael Kors (KORS) declined 4.1% to $56.79, with many in the investment community feeling it was only a slight correction, presenting a stock buying opportunity, and that there’s nothing wrong with the company’s fundamentals or outlook.