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Retail Apparel Stocks Dip in June

The Dow Jones Industrial Average dipped 1.4% in the four weeks ending June 28, but managed to finish the first half of the year up 15.2%. Apparel retail stocks fell in tandem with the overall market for the month, but have turned in a 14.1% gain for the year so far, helped by better-than-expected earnings performance at many key companies. The wholesale and manufacturing index was flat, bringing the year-to-date gain to almost 24%.

Retail Gainers and Losers

New York & Co (NWY) jumped 14.4% to $6.35 per share, a new 52-week high, after posting better than expected quarterly earnings in late May. The year-to-date return for this stock has been over 76%.

Alco Stores (ALCS) gained 14.3% to $11.10, despite a first-quarter same-store sales decline of 2.2%. Total sales were up by .9%, but the retailer sustained a net loss of $1.7%, or $.51 per diluted share. The company blamed the sales and earnings shortfall on unseasonably cool weather that negatively impacted traffic and demand for outdoor products.

Cititrends (CTRN) gained 9.7% to $14.53 despite being downgraded by Zacks Investor Research to a strong sell. The urban fashion retailer has witnessed sharp downward estimate revisions after reporting disappointing first-quarter fiscal 2013 earnings in late May.

Body Central (BODY) gained 8.4%, to $13.32. Although the specialty apparel retailer turned in disappointing first-quarter results, with sales down 1.5% to $81.4 million and net income of $2.7 million that was half of last year’s level, many analysts expressed opinions that the company had “bottomed out” and would start to show improved performance. It has a strong balance sheet, no long-term debt, and $43 million in cash.

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Lululemon Athletica (LULU) was the biggest loser in June, falling 15.8% to $65.50. Although the company began to restock its sought-after Luon pants earlier than expected, the news that CEO Christine Day would step down after five years in that job sent shock waves through the markets. Many had credited Day with the company’s meteoric growth. The company has begun to search for Day’s successor.

Bon-Ton Stores (BONT) dropped 15.2% to $18.05. Despite being upgraded to a strong buy by Zacks Investment Research, the stock has already increased by almost 54% so far this year, and carries a significant debt load, which may have investors nervous.

Ascena Retail Group (ASNA) lost 14.2% to $17.45, after the operator of Lane Bryant, Catherine’s and Justice reported a fiscal third-quarter net income drop of almost 47% despite stronger revenue, and lowered its full-year earnings forecast. The results were affected by acquisition costs and a charge tied to the extinguishment of debt. Zacks downgraded the stock to a strong sell.

Sears Holdings (SHLD) plunged 13.8%, to $42.08, after the operator of Sears and Kmart reported that first-quarter earnings plunged 27% for its Sears Hometown and Outlet Stores, Inc unit, hurt by a cold spring. Home improvement retailer Lowe’s has agreed to buy 60 of Sears Holding’s bankrupt Orchard Supply Hardware Stores for $205 million. Sears has also joined other large retailers in severing ties with Paula Deen, following revelations that the celebrity chef used racial slurs in her restaurants and elsewhere, and will phase out products tied to Deen’s brand.

Wholesale Gainers and Losers

G-III Apparel Group (GIII) was the top performing manufacturing stock in June, surging 14.3% to $48.12, after reporting a surprise first-quarter profit, the first time in 15 years that it’s made money this time of year. The maker of licensed Calvin Klein, Guess?, and NFL clothing has transformed its business model over the years from being coat-driven to more seasonally diverse. In the past year it acquired the Vilebrequin men’s swimwear label last year, signed a deal with Calvin Klein parent PVH to make handbags, dresses and swimwear, and entered into an agreement to make clothing and accessories under the Ivanka Trump brand.

Dixie Group (DXYN) gained 10.4% to $8.30 after the company announced it is in negotiations to acquire Robertex Associates, a producer of fine wool floor covering products.

Phillips-Van Heusen (PVH) gained 8.6% to $125.05, after reporting a first-quarter loss of $20 million, or $.25 per share, that beat analyst estimates. Excluding one-time charges related to acquisition costs, the company earned $1.91 per share. Revenue from Calvin Klein more than doubled in the first quarter, helped by the company’s acquisition of Calvin Klein licensee Warnaco in February, and total revenue grew by 34% to $1.91 billion. Net income of Chairman and CEO Manny Chirico sold 47,296 shares at $119.85 per share for a total of $5.67 million. RBC Capital removed PVH from its Top Pick list due to valuation, but raised its price target to $128 from $120.

Quiksilver (GES) plummeted 18.2% to $6.44, making it the biggest percentage loser in the month, after posting an adjusted loss of $.12 per share, worse than Wall Street expectations. Revenue fell 7% to $459 million, below consensus estimates.