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financial

The New Year's Blahs: Retail Shares Decline On Downbeat Outlook

It's a new year, but the same old stock market story.

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American Eagle Outfitters dropped 33.5 percent for the year.

Johnson credits Aéropostale's success to the arrival of Mindy Meads, new chief merchandising officer, in April. "Within six months of her arrival, we have already seen improvements in the merchandise," Johnson said.

On the M&A front, the eyeing of Saks Inc. as a possible acquisition target by Icelandic firm Bauger Group drove up shares of the high-end department store 16.5 percent for the year to $20.76. Financial sources are keeping close tabs on the retailer's performance during the holiday shopping season. The share price offer hinges on Saks' success, sources said.

Other notable gainers in 2007 were Guess, Urban Outfitters and Abercrombie & Fitch, which showed gains of 19.5, 18.4 and 14.9 percent, respectively.

Urban Outfitters' success is driven by its Anthropologie division, according to analysts.

Another notable gainer was Gap Inc., with a 9.1 percent increase for the year. The specialty retailer, which has been struggling with sluggish sales and merchandise misses, has managed to gain some control over inventories and merchandise margins under new chief executive officer Glenn Murphy.

Retail giant Wal-Mart saw a modest 2.9 percent increase in its stock price for the year, while it's competitor, Target, dropped 12.4 percent in 2007.

Wal-Mart may be in the middle of one of the largest turnarounds in retail history, achieving a stronger-than-expected holiday season, according to Johnson. "Unlike the continued decline at Macy's and Sears, Wal-Mart appears to be in a remarkable turnaround," Johnson said. "Although unnoticed by the Street — and with apparel and home still a work-in-progress — Wal-Mart has undergone a true transformation over the past year, from top to bottom."

Target, meanwhile, appears to have hit a bump over the holiday season. Target lowered its December sales forecast to the range of down 1 percent to up 1 percent after experiencing lower-than-expected traffic. Management originally expected same-store sales of between 3 and 5 percent.

Of the declining stocks in the retail sector, Coldwater Creek showed the steepest fall with a 72.7 percent drop to $6.69 from $24.52. Merchandise misses and a change in its executive ranks over the past year likely pushed away investors.
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