Archive for December, 2008

Retail stocks suffer but some defy dismal sales data (Reuters)

Friday, December 26th, 2008 | Finance News

NEW YORK (Reuters) –
Retail shares traded lower on Friday following data showing the first decline in holiday sales in at least 40 years, though a handful of stores defied the trend.

The Standard & Poor's Retail Index (.RLX) fell 0.3 percent, with department store chains like Dillard's (DDS.N), Macy's Inc (M.N) and the more upscale Saks Inc (SKS.N) posting share declines of 9.4 percent, 2.7 percent, and 5.7 percent respectively.

Among specialty retailers, American Eagle Outfitters (AEO.N) fell 0.7 percent, while Gap Inc (GPS.N), which owns the Banana Republic and Old Navy chains, was down 0.4 percent.

The latest data on the holiday shopping season came from SpendingPulse, the retail data service of MasterCard Advisors, which showed that sales fell 2 percent in November and 4 percent from December 1 to December 24.

The firm called the 2008 holiday shopping season "one of the most challenging ... we've ever had in modern times."

Overall, holiday sales fell as much as 4 percent, excluding gasoline, said SpendingPulse, which estimates U.S. retail sales across all forms of payment including check and cash.

Consumers who have contended with a year-long recession, job losses and tight credit, largely cut their spending this holiday shopping season.

The holiday shopping season usually commences the day after U.S. Thanksgiving, which fell on November 27 this year, till the eve of Christmas on December 24.

The change in consumers' mindset is here to stay, said Candace Corlett, president of retail consulting firm WSL Strategic Retail.

"The longer we are stuck in this fearful environment, where everybody is so afraid of what the next disaster will be ... the more entrenched the mindset of saying 'no' will become," she said.

Patricia Edwards, a retail consultant at Storehouse Partners, warned that the country's economic troubles could extend well into 2009.

"These (sales) numbers do not yet fully reflect what the consumer is in for in the next year and the reality of what's going to happen," she said

U.S. retailers' hopes that the last weekend before Christmas would bring a flurry of shoppers to stores were dashed, as poor weather kept many consumers huddled indoors.

But bad weather toward the end of the season may have helped online sales, SpendingPulse said, adding that the category showed the least decline at 2.3 percent compared to 2007's holiday season.

Shares of Amazon.com Inc (AMZN.O) rose 0.8 percent. Amazon said it posted its best holiday sales yet, as more than 6.3 million items were ordered on its website worldwide for the peak shopping day of December 15.

Other stocks that rose included specialty clothing retailers such as AnnTaylor Stores Corp (ANN.N), up 2.8 percent, Liz Claiborne Inc (LIZ.N), up 17 percent, and Aeropostale Inc (ARO.N), up 2.4 percent, despite a drop of up to 21 percent in holiday apparel sales as measured by SpendingPulse.

Among the discount retailers, Wal-Mart Stores Inc (WMT.N), the world's largest retailer, was up 0.2 percent, and Target Corp (TGT.N) rose 0.9 percent.

"What a lot of people are looking at right now... is they are saying this is as bad as it is going to get," Edwards said.

"(People are thinking) things are going to get better. Stocks are cheap, let's fish in our portfolios today for the coming year," she said. "If they are short, they are covering, and if they haven't had any, they are buying some. It is a value play."

Jones Apparel Group Inc (JNY.N), whose brands include Nine West and Jones New York, said it reduced its $1.25 billion lines of credit to a single line of $600 million in return for more flexibility. Its shares gained 34.5 percent.

(Editing by Leslie Gevirtz and Derek Caney)

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GMAC may have asked for $6 billion in aid: CreditSights (Reuters)

Friday, December 26th, 2008 | Finance News

NEW YORK (Reuters) –
GMAC LLC may have applied for up to $6 billion in funds from the government's financial bailout program, and could potentially sell $17.5 billion in government-backed debt to shore up its capital position, CreditSights said.

The finance company, owned by Cerberus Capital Management (CBS.UL) and General Motors Corp (GM.N), on Wednesday won approval to become a bank holding company, giving it access to the government lending program.

GMAC has said without bank holding company status, it would likely have to sell assets and take other extraordinary measures to make good on its obligations. The company, which makes auto loans for GM's customers, has lost $7.9 billion over the last five quarters.

"While GMAC has not quantified its capital injection request from Troubled Assets Relief Program (TARP), we estimate the company could have applied for up to about $6.3 billion," CreditSights analysts Richard Hofmann and Adam Steer said in a report late on Thursday.

This is based on capital injections being limited to 3 percent of risk-weighed assets, the analysts said.

GMAC may also be eligible to sell up to $17.5 billion in bonds backed by the Federal Deposit Insurance Corp if approved to sell debt under the government's Temporary Liquidity Guarantee Program (TLGP), CreditSights said.

Issuance under the TLGP is limited to 125 percent of outstanding, unsecured debt that a company issued before Sept 30, 2008, and that matures before June 30, 2009, the analysts said.

GMAC's bonds surged on the news of the approval of bank holding company status. The company's 5.625 percent bond due 2009 jumped 27 cents to 94 cents on the dollar, according to MarketAxess.

The cost to insure GMAC's debt with credit default swaps also plunged to around 24 percent the sum insured, or $2.4 million to insure $10 million for five years, plus annual payments of 5 percent. The swaps had traded at around 47 percent before the news.

(Reporting by Karen Brettell; Editing by Neil Stempleman)

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Retailers slash prices to entice holiday shoppers (AP)

Friday, December 26th, 2008 | Finance News

NEW YORK – Shoppers hit the stores Friday to return unwanted gifts and take advantage of drastic price cuts offered by retailers desperate to get rid of old merchandise and boost their less-than-cheery holiday sales.

Many retailers opened before 6 a.m., offering 50 percent to 75 percent off on toys, furniture, electronics and clothing. Stores were hoping the discounts would entice shoppers to redeem gift cards and use cash from returning unwanted gifts to buy something new.

Laura Hernandez, a 37-year-old nurse, hoped to find a good deal at a Miami-area Wal-Mart on the one present her husband and son had really wanted — a plasma TV.

"When they saw that there was no Christmas gift larger than the Christmas tree, they knew there was no TV," Hernandez said. "They know Mommy is out early this morning bringing home their new toy."

But consumers who saw plenty of bargains before Christmas still seemed to be spending carefully — meaning even the big discounts may not be enough to salvage one of the most dismal holiday shopping seasons in years. Some were unimpressed with even rock-bottom prices while others were just flat-out returning items for cash.

After an early surge, several malls in the New York area were "quieter than expected" on Friday, said Marshal Cohen, chief industry analyst at market research firm NPD Group Inc.

Among the cautious consumers was Gigi Johnson, who bought laundry detergent and some clothes at Wal-Mart in Milwaukee for her twin 14-year-old daughters. But she said she was not planning any large purchases for the next few months and would put the money she received from Christmas in the bank.

"Maybe I'll wait until tax time and get a computer or TV," Johnson said. "But until then, I'm resisting the temptation to buy anything else."

The lure of after-Christmas shopping was hurt by the deep discounts stores offered before the holiday. Gift card sales have also been down, meaning fewer people are returning to the malls with "free money" to spend.

"The last week of December represents about 14 percent of Christmas sales," said C. Britt Beemer, chairman of America's Research Group. "You can't save a season with only one-seventh of the sales to go."

The holiday season — which typically accounts for 30 percent to 50 percent of a retailer's annual total sales — has been less than jolly for most retailers. Job cuts, portfolio losses and other economic woes have convinced consumers to cut back on their spending. Meanwhile, strong winter storms during the holiday season kept some would-be shoppers at home.

According to preliminary data from SpendingPulse — a division of MasterCard Advisors that tracks total sales paid for by credit card, checks and cash — retail sales fell between 5.5 percent and 8 percent during the holiday season compared with last year. Excluding auto and gas sales, they fell 2 percent to 4 percent, according to SpendingPulse.

Sales of women's clothing dropped nearly 23 percent while men's clothing sales slipped more than 14 percent. Footwear sales fell 13.5 percent. Sales of electronics and appliances fell even more drastically, dropping almost 27 percent.

More consumers appeared to do their shopping online, particularly in the last two weeks of the season when storms snowed shoppers in. Online sales dipped just 2.3 percent from last year, according to SpendingPulse.

Online retailer Amazon.com said Friday the 2008 holiday season was its "best ever," with more than 6.3 million items ordered. Holiday bestsellers included the Nintendo Wii, Samsung's 52-inch LCD HDTV, the Apple iPod touch and the Blokus board game. Cohen said Amazon did a great job offering deals and driving customers to its site, adding that "the best possible prices" were frequently on Amazon.com.

A better indicator of how retailers fared will arrive Jan. 8, when major stores report same-store sales, or sales at locations open at least a year, for December.

Retailers, who have been cutting prices all season, offered more deals for after Christmas. Toys R Us said it was cutting prices by 60 percent on some brands. Sears stores were offering doorbuster deals through noon.

Tom Aiello, a spokesman for Sears and Kmart, said Kmart customers were snapping up clearance items while Sears shoppers were buying smaller TVs. He said practical items, like Craftsman tool kits and tires, were also selling well.

The deals still weren't enough for some shoppers.

Paul McAdam, 48, of Everett, Mass., took a 20 percent pay cut recently and was shopping for "items I need in a price range I can't pass up."

"I'm a little disappointed because a lot of the prices seem to be about the same as before Christmas," he said.

Beemer said retailers may be greeting a lot of shoppers like Guites, and see returns up 50 percent to 60 percent.

Newlywed Anthony Guites, 32, planned to stop at three different Miami-area stores to return gifts from his wife. He had three things to exchange at Wal-Mart for a fishing rod he wanted.

"She got me a fishing rod that I don't like. She got me this tool set that I already have. And she got me workout clothes that, let's just say, are way too colorful for me," he said. ____

Associated Press Writers Sarah Skidmore in Portland, Ore., Betsy Vereckey in New York, Damian Grass in Miami, Mark Pratt in Boston and Dinesh Ramde in Milwaukee, Wis., contributed to this report.

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