Battered Retail Industry Gets Lift From Wal-Mart, Apparel Chains

Wal-Mart's Earnings: A Bright Spot for Retail?
  • Investors approached latest earnings with low expectations
  • Dick’s, Urban Outfitters and other retailers see stocks surge

Investors in retail stocks are finally getting some good news.

After a week of dismal earnings reports and forecasts, Wal-Mart Stores Inc. and other chains delivered more upbeat news over the past 24 hours, sending stocks soaring. Wal-Mart, which posted better-than-expected profit and sales, rose the most since the depths of the last recession in 2008. They climbed as much as 9.5 percent to $69.17.

“Its amazing what a difference a week can make,” said Ken Perkins, president of Retail Metrics. “Last week, it was doom and gloom -- the sky is falling, retail is done and finished -- and today it’s more cautious optimism. There’s opportunities out there, but the world of retail is evolving more and more into a world of technology.”

It helps that investors came into the latest batch of earnings with lowered expectations. Dick’s Sporting Goods Inc., for instance, barely beat first-quarter profit estimates and lowered its annual forecast. But shareholders were pleased to see a rebound in its Golf Galaxy chain and optimistic that the company can capitalize on the liquidation of rival Sports Authority. Dick’s shares climbed as much as 11 percent to $42.23.

Clothing Chains

American Eagle Outfitters Inc., Urban Outfitters Inc. and Perry Ellis International Inc. also rallied after topping first-quarter earnings estimates. At American Eagle, same-store sales grew 6 percent in the period, outpacing the 4.7 percent predicted by analysts. The company’s Aerie lingerie brand performed especially well, with a same-store gain of 32 percent, helped by a shift toward lacy “bralettes.”

The stock rose as much as 19 percent to $15.93, the biggest intraday advance in almost 16 years.

Urban Outfitters, meanwhile, posted same-store sales growth of 1 percent in the first quarter. Analysts had estimated a 0.5 percent decline, according to Consensus Metrix. Better marketing and fewer markdowns at the Urban Outfitters and Anthropologie chains boosted the results, the Philadelphia-based company said. The shares surged as much as 15 percent.

Perry Ellis, the men’s sportswear company, reported first-quarter earnings of $1.01 a share. That exceeded the average estimate of 90 cents. The Miami-based retailer also raised its full-year earnings forecast to $1.95 to $2 a share, from as much as $1.95 earlier. Analysts had predicted $1.91 on average. The shares jumped as much as 18 percent to $19.48.

Victoria’s Secret

Not all of recent earnings were positive. L Brands Inc., which owns the Victoria’s Secret chain, cut its full-year profit forecast to $3.60 to $3.80 a share, down from an earlier range of as much as $4.10. Shares of L Brands dropped as much as 5.9 percent to $60 Thursday.

And there’s still concern about the department-store industry after bleak forecasts from both Macy’s Inc. and Nordstrom Inc. last week. Retail results have been generally been “very mixed,” said Betty Chen, an analyst at Mizuho Securities.

“Some of it is self inflicted -- some of it is the macro environment,” she said. “It definitely seems to be a wide range.”

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