Sears Leads Drop in Retail Stock Ahead of Sales Report

Sears Holdings Corp. (SHLD), the department- store chain controlled by hedge fund manager Edward Lampert, and Abercrombie & Fitch Co. (ANF) led declines in retail stocks ahead of tomorrow’s industrywide monthly sales report, amid concerns the European crisis will curb consumer confidence.

Sears, based in Hoffman Estates, Illinois, declined 9 percent to $52.34 at the close in New York, the biggest decline since Dec. 27, and largest drop in the Standard & Poor’s 500 Index. Abercrombie slumped 5.5 percent.

The International Council of Shopping Centers, a trade group tracking retailers, today cut its monthly U.S. same-store sales forecast to 2 percent from 3 percent, citing weakened consumer confidence leading to a slowdown in discretionary spending. Concerns the European crisis may spread globally hurt Sears in particular, because many of its customers seek loans to buy appliances such as washing machines, said Paul Swinand, an analyst at Morningstar Inc. (MORN) in Chicago.

“They’re generally more affected by anything that’s credit-sensitive,” Swinand said. “If there’s a global contagion of Lehman proportions, then there’s a credit crunch, then a liquidity withdrawal, anybody that needs to sell stuff for housing or big appliances is going to get hurt worse.”

Out of the 32 companies in the S&P 500 Retailing Index (S5RETL), 30 recorded declines today, including J.C. Penney Co. and Limited Brands Inc., owner of the Victoria’s Secret lingerie chain. The index decreased 1.6 percent, compared with a 1.4 percent decline for the S&P 500. (SPX)

Global Stocks Drop

Global stocks slumped after Italy failed to meet its maximum target at a debt sale, Spain struggled to bolster its banks and a Greek poll showed increased support for anti- austerity parties.

At Sears, domestic same-store sales may have declined this month in the “high single-digits,” driven by weakness in apparel, boutique firm Cleveland Research wrote in a note to clients today.

Retailers are scheduled to report same-store sales, which exclude recently opened locations, for May tomorrow. Sales are anticipated to rise 1.8 percent, compared with a gain of 5.5 percent in May 2011, according to estimates compiled by Retail Metrics Inc.

To contact the reporter on this story: Sapna Maheshwari in New York at sapnam@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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