Beaten-down retail stocks are getting a lift on Wall Street, led by one of the sector’s most troubled retailers, J.C. Penney.
Penney soared early and is up $1.51 to $7.47 in late trading – a 25% jump that’s the New York Stock Exchange’s biggest percentage gainer Thursday. The surge comes after Penney posted better fourth-quarter revenues and less losses than Wall Street had forecast. CEO Mike Ullman also said the current quarter was shaping up as the company’s first profitable quarter since early 2011.
The “less bad” results at the department store chain still in the early stages of a turnaround buoyed other retailers, some whose quarterly results also bested Wall Street expectations.
Sears was up 6% to $42.91. The company said fourth-quarter sales fell 14%, but its losses narrowed to $358 million from $489 million in the year-ago quarter.
Best Buy gained 4.3% to $26.94 in early trading after posting better than expected profits and word that it will eliminate 2,000 management jobs. But shares were fading before the market’s close and were off 17 cents to $25.65.
Kohl’s rose 3% to $56.15 after reporting lower fourth-quarter earnings due to holiday markdowns. The company expects modest sales gains in 2014.
Target, which posted a 46% drop in fourth-quarter earnings and a 5.3% drop in revenues due in part to a security breach that scared off shoppers, was unable to carry through Wednesday’s 7% gain. Shares were essentially flat at $60.56.
The gains came despite comments by Federal Reserve Chair Janet Yellen, who told the Senate Banking Committee Thursday that economic data are pointing to weak consumer spending and job growth. It’s unclear if both are being impacted by the severe winter weather that’s gripped much of the nation since December.
“We have seen quite a bit of soft data over the last month or six weeks,” Yellen said. “We need to get a firmer handle about how much of the softer data can be explained by the weather.”
Winter aside, retail analysts says some industry leaders have yet to weather turnarounds.
Credit Suisse analyst Gary Balter’s take on Sears, which posted a 9% drop in annual sales and suffered a full year loss of nearly $1.4 billion: “We would expect that 2013 was the nadir, as it is hard to imagine that a retailer can lose that much money on the large sales base that Sears enjoys. However, the company’s continued denial on improving their store shopping experience, which remains where the vast majority of sales happen and to allow competitors with higher service levels to chip away at Sears’ market share, makes one wonder how Sears turns cash flow positive.”
Courtesy of USA Today