July 29, 2009
Retail stocks rose Wednesday in the wake of better-than-expected corporate earnings reports. Apparel giant VF Corp. jumped after its second-quarter profit decline was smaller than expected and it signaled an improved second-half outlook.
The S&P Retail Index rose 1.4% to 344.99. VF, owner of brands from Wrangler to 7 for All Mankind, climbed 6.8% to $64.68.
The company said late Tuesday that while business remains tough and profit was hurt by a stronger dollar and pension costs, its largest brands – Wrangler, Lee, North Face and Vans, continued to gain market share. Chief Executive Eric Wiseman also said that profit and sales in the second half of the year should show a “marked improvement” from the first half.
The positive surprise from VF also bodes well for results from other apparel companies, analysts said. Jones Apparel Group Inc. rose 2.3%. Liz Claiborne Inc. was up 1.4%.
VF’s results “will alleviate concerns about another leg down in vendor industry earnings and represents a good first step towards rebuilding investor confidence in management’s ability to plan and execute after last quarter’s earnings disappointment,” said Credit Suisse analyst Omar Saad. “The fact that management is now seeing signs that international businesses are starting to stabilize suggests that the global apparel recession could be in its final throws in certain regions.”
VF’s net income fell to $75.5 million, or 68 cents a share, from $104 million, or 94 cents, a year ago. Revenue for the three months ended June 30 fell 11% to $1.49 billion. Analysts polled by FactSet Research had predicted the Greensboro, N.C.-based company would earn 57 cents a share on $1.53 billion in revenue. The company said it expects to earn between $4.70 and $5 a share for the full year, in line with analysts’ expectations of $4.84.
Investor sentiment also was helped by coffee giant Starbucks Corp.’s better-than-expected quarterly result and the company showed that its traffic has improved even as consumers remain watchful of what they spend. See full story. Tech bellwether Apple Inc.’s quarterly results also beat Wall Street expectations as it sold 5.2 million iPhone units and recorded strong sales of Mackintosh computers.
Largest U.S. electronics retailer Best Buy Co. was down 0.6%. Wal-Mart Stores Inc., the world’s biggest retailer that’s also making a push in electronics, was up 0.3%.
For further information, visit: http://www.marketwatch.com/story/retail-stocks-rise-as-apparel-giant-vf-beats-views