Retail Stocks Fall

Gap announces CEO will retire; Merrill Lynch reaches settlement; and more of today's stocks to watch

Home Depot (HD ) posted $0.36 vs. $0.27 first quarter EPS on a 5% same-store sales rise and a 17% total sales increase. The home improvement retailer expects to meet the current $0.47 second quarter EPS consensus estimate of Wall Street analysts. However, management said on a conference call with analysts that it remains "cautious" on the outlook for the home-improvement market. AG Edwards downgraded the stock to hold, saying HD's first quarter results were not as strong relative to Lowe's (LOW ) results. S&P maintained hold.

After the market close, Gap (GPS ) announced that CEO Millard Drexler will retire later this year after its board appoints a new chief.

Apparel retail stocks fell, with Abercrombie & Fitch (ANF ) under pressure on trading floor rumors of accounting problems. On a broader scale, Instinet Redbook says same-store sales fell 0.3% for the 1ast 3 weeks of May vs. the April average. Meanwhile, UBS Warburg said chain-store sales were flat for the week ended May 18 vs. the prior week.

Salomon Smith Barney cut earnings estimates for Siebel Systems (SEBL ) and eight other application software companies, including Ariba (ARBA ), E.piphany (EPNY ), EXE Technologies (EXEE ), Informatica (INFA ), i2 Technologies (ITWO ), Microsoft (MSFT ), PeopleSoft (PSFT ), and Vignette (VIGN ).

The SEC claims that PeopleSoft's (PSFT ) former auditors, Ernst & Young, violated accounting and independence rules in past audits for the company. CS First Boston says this is no reason to sell PSFT shares. S&P keeps hold recommendation on the stock.

Merrill Lynch (MER ) shares gained after the brokerage and the New York State Attorney General have reportedly agreed to settle charges that Merrill misled investors with overly optimistic research on investment banking clients. Under the terms of the agreement, MER will make a civil payment of $48 millon to New York State and an additional $52 million to settle the matter with all other states. The settlement represents neither evidence nor admission of wrongdoing or liability.

XL Capital (XL ) and Allstate (ALL ) shares fell after Lehman Brothers downgraded the stocks to buy from strong buy.

S&P downgraded Broadwing (BRW ) to avoid from hold, saying the shares are off on accounting and liquidity concerns. Yesterday, the stock was down as Kaufman Bros. issued cautious comments on the company.

Qualcomm (QCOM ) reaffirms June quarter EPS guidance of $0.21-$0.23, on 3%-6% sequential revenue rise. It sees $0.90-$0.95 fiscal year 2002 EPS (pro forma) on 4%-8% revenue growth. S&P keeps buy.

Morgan Stanley downgrades EGL Inc. (EAGL ) to underweight from equal-weight.

Merrill Lynch upgraded Ford Motor (F ) to near term strong buy from neutral, and added it to its to Focus 1 list.

Celgene (CELG ) shares rose. Based on results from clinical trials of Thalomid for use in renal cell carcinoma, the company set clinical and regulatory plan for drug. Dresdner reportedly upgrades Celgene to buy from add.

CS First Boston upgrades Northwest Airlines (NWAC ) to strong buy from buy.

Leap Wireless (LWIN ) fell after UBS Warburg downgraded the stock to hold from strong buy.

Albertson's (ABS ) raised $0.53 first quarter EPS from continuing operations guidance to $0.55-$0.58.

Target (TGT ) reported better-than-expected first quarter EPS of $0.38, vs. $0.28 a year ago, on 5.2% same-store sales rise and 15% total revenue rise.

Borg Warner (BWA ) sees second quarter EPS of $1.55-$1.65, and raised $4.90-$5.10 2002 EPS guidance to $5.50 on 10% sales increase (EPS guidance is before accounting change).

Staples (SPLS ) posted $0.14 vs. $0.08 first quarter EPS from operations on a 2.9% sales rise. The office-products retailer raised its fiscal 2003 EPS forecast to $0.79-$0.83.

The U.S. Federal Trade Commission issued a request for additional information relevant to the proposed acquisition of Pennzoil-Quaker State (PZL ) by Shell Oil Co., a jointly-held unit of Royal Dutch Petroleum (RD ) and Shell Transport (SC ).

Auto parts maker Visteon (VC ) raised its net income guidance to $60-$70 million FOR Q2 and $25-$75 million for all of 2002, excluding special items. S&P maintains hold.

Big Lots (BLI ) posted $0.11 first quarter EPS vs. breakeven results on a 12% same-store sales rise and a 17% total sales increase. The discount retailer narrowed its $0.05-$0.09 second quarter loss guidance to $0.03-$0.05 loss, raises $0.44-$0.49 fiscal year 2003 EPS guidance to $0.50-$0.55.