Wal-Mart Disappoints

Elena
05 Jan, 2006
New York City

Stocks started Thursday session flat as retailers'' reports on December sales showed respectable holiday season but a few big names, including Wal-Mart, disappointed traders. Among the leading gainers were Target Corp., Costco Wholesale, American Eagle Outfitters with luxury retailers like Nordstrom and Federated Department Stores making the best performance. Wal-Mart fell short of expectations, posting only a 2.2% same-store sales growth.

U.S. MARKET AVERAGES

U.S. stock averages opened near the unchanged mark on uneven December sales figures. All in all retail sales were higher, though a few big names disappointed investors. A five-year drop in unemployment claims failed to lift market sentiment. Investors also awaited the Institute for Supply Management's December index of service sector activity.

The nation's big retailers released reports, showing volatile but respectable holiday season as consumers saved most of their shopping for the days before and after Christmas. The early winners included Target Corp., Costco Wholesale Corp., Nordstrom Inc., Abercrombie & Fitch Co. and others.

Wal-Mart ((WMT)), the world's largest retailer, fell short of expectations posting a 2.2% gain in same-store sales. The results missed the 2.4% estimate from analysts surveyed by Thomson Financial. Total sales rose 6.3%. The company also said its Q4 profits would come in at the low end of expectations.

Rival Target reported a 4.7% gain in same-store sales in December, beating estimates of 4.6%. Total sales rose 11.6%. The company reaffirmed its Q4 outlook.

American Eagle Outfitters ((AEOS)) revealed that its total sales for December rose 15.5% to $433.2 million, while comparable store sales grew by 9.8%.

Luxury retailers had the best performance among department stores. Nordstrom had a 7.7% gain in same-store sales, well above of expectations of a 3.8% increase. Total sales rose 10.7%.

Federated Department Stores Inc. posted a 3.4% gain in same-store sales, better than the 2.1% increase from Wall Street. Total sales, which include stores from the company''s 2005 acquisition of May Department Stores Co., rose nearly 100%.

In research news, Banc of America Securities downgraded Boeing Co to neutral from buy on valuation, saying the stock is likely to be range bound after its strong performance since March 2003.

Lehman Brothers raised JDS Uniphase Corp. ((JDSU)) to equal-weight from underweight. Deutsche Bank raised its rating on Cablevision Systems Corp ((CVC)) to buy from hold.

In the first hour of trading, the Dow Jones industrial average fell 1.12, or 0.01%. The Standard & Poor''s 500 index rose 1.15, or 0.09%, and the Nasdaq composite index rose 5.28, or 0.23%.

Bonds edged lower, with the yield on the 10-year Treasury note rising to 4.37% from 4.35% late Wednesday.

MOVERS AND SHAKERS

Boeing ((BA)) was downgraded by the Bank of America to neutral from buy, citing valuation. Analyst Nick Fothergill also cut his price target on the company by $1 to $72 on consideration that further upside to the stock appears limited, after a strong run in the shares since March 2003. A 50% drop in orders in 2006 is expected. A supply chain survey shows increasing risk in raw material price inflation and a risk of component shortages, and as a result the broker cut his 2007 aircraft delivery forecast to 437 planes from 453. The company’s shares fell 2.1%.

Computer Sciences ((CSC)) gained 8.5%, following a report that private equity firm Blackstone Group and Hewlett-Packard Co are considering a buy out of the company.

Aeropostale Inc. ((ARO)) said its comparable-store sales rose 11.4% in December, and the company boosted its fourth-quarter earnings forecast. The stock jumped 9.2%.

Gentiva Health Services ((GTIV)) agreed to buy the provider of home healthcare and hospice Healthfield Group Inc. for $454 million in cash and stock with $55 million of Gentiva common stock and around $399 million in cash. Gentiva anticipates the transaction will be accretive to its fiscal 2006 results. Gentiva’s shares rose 7.9%.

ECONOMIC NEWS

Thursday morning, the Department of Labor released its report on initial jobless claims in the week ended December 31, showing that jobless claims fell more than economists had been expecting.

The Labor Dept. said that jobless claims fell to 291,000 from the previous week''s revised figure of 326,000. Economists had been expecting jobless claims to fall to 320,000 from the 322,000 originally reported for the previous week.

The report also showed that the less volatile 4-week moving average fell to 316,750 from the previous week''s revised average of 326,000.

The Labor Dept. added that continuing claims during the week ended December 24 rose to 2.718 million from the preceding week''s revised level of 2.705 million.

INTERNATIONAL MARKETS NEWS

Asian-Pacific benchmarks rallied for a fourth straight session, boosted by strong tech and export issues after the strong performance of U.S. S&P 500 at the close of 2005. The leading gainers were Taiwan’s Weighted index, soaring 1.4% to 6,709.87 and Singapore Straits Times, up 0.99% to 2,407.80. The Nikkei advanced 0.4% to 16,425.37. Shanghai Composite extended gains to close up 1.4%.

European stocks traded in a tight range at mid-day. The German DAX 30 declined 0.1%. The French CAC 40 inched up 0.03% and London’s FTSE 100 gained 0.1%, lifted by strong oil stocks. The euro fell 0.2% against the dollar to $1.2089.

OIL, METALS, CURRENCIES

Crude oil prices retreated ahead of inventory report and mild weather. Light sweet crude for February delivery fell 8 cents to $63.34 a barrel. Heating oil traded 1 cent down at $1.8096 a gallon. Gasoline shed 1 cent to $1.7710 a gallon. Natural gas dipped 22 cents to $9.9750 per 1,000 cubic feet. London Brent dropped 10 cents to $61.58.

European gold advanced, despite strengthening dollar. In London gold rose to $531.60 per troy ounce, up from $530.90. In Zurich the precious metal advanced to $530.45 from $529.35. In Hong Kong gold fell $2 to close at $532.10. Silver opened at $8.98, down from $9.05.

The U.S. dollar gained ground against major currencies. The euro was quoted at $1.2083, down from $1.2122. The dollar bought 116.32 yen, up from 115.95. The British pound traded at $1.7501, down from $1.7581.

EARNINGS NEWS

Performance Food Group Co, ((PFGC)), food and non-food products distributor, reported that Q1 earnings are expected to be 11 cents to 15 cents a share and fiscal 2006 earnings are seen at $1.20 to $1.30 a share, missing analysts'' estimates standing at 18 cents and $1.33 a share, respectively.

Shoe Carnival, ((SCVL)), footwear retailer, announced that its December same-store sales advanced 10.6%. Total sales for the five weeks ended Dec. 31, increased 12.8% to $72.5 million.

Chico''s FAS Inc, ((CHS)), apparel retailer, reported same-store sales advanced 16.4% in December. Total sales for the five weeks ended Dec. 31 rose 34.3% compared with the same period a year earlier. The company expects earnings of 24 to 25 cents a share for Q4, missing on that basis the analyst estimate for earnings of 26 cents a share.

New York & Co, ((NWY)), specialty retailer, reported that its December same-store sales increased 10.9%. Total sales for the five weeks ended Dec. 31, advanced 16.2%, beating on that basis analysts’ expectations of a same-store sales gain of 5.1%. The company expects earnings of 34 cents to 36 cents a share, up from its earlier range of 29 cents to 36 cents a share. Analysts were projecting 36 cents a share.

Cache Inc, ((CACH)), women''s apparel retailer, reported that December same-store sales advanced 4% over the comparable period a year ago, and increased 4% during Q4. Total sales grew 6.5% in December, and advanced 0.9% from last year''s fourth-quarter period. The company added that earnings for the quarter would be at the low of its previously forecasted range of 46 cents to 48 cents a share.

Bebe Stores Inc, ((BEBE)), women''s apparel and accessories retailer, reported that same-store sales in December increased 1.1% over year-ago levels. Total sales for the period advanced 11.1%. For the fiscal Q2, the company announced that same-store sales gained 2.2% while total sales were up 11.5%.

Panera Bread Co ((PNRA)), food for breakfast and lunch producer, reported its December systemwide comparable bakery sales increased 7.2%. The company forecast earnings per share for the quarter of 50 cents to 51 cents a share. Analysts anticipated earnings of 50 cents a share.

Zale Corp ((ZLC)), jewelry retailer, announced that same-store sales, advanced 0.9% for the combined months of November and December. Based on the company ''s current performance, Zale forecast Q2 earnings at $2.08 to $2.13 a share, which includes a tax benefit of 20 cents. Analyst estimate stands at $2.08 a share.

Entegris Inc, ((ENTG)), material management and handling products manufacturer, reported a Q1 loss of 12 cents a share, down from a profit of 8 cents a share a year-ago. If not for items related to the company''s merger with Mykrolis Corp., the company gained 5 cents a share in Q1, missing analyst estimate for earnings of 9 cents a share. Sales increased in Q1 to $146.8 million from $89.1 million in the same period a year ago.