The WWD Global Stock Tracker closed today down 0.25 percent to 114.11 as investors took profits and continued to weigh options across all market sectors following record-setting gains in the Dow Jones Industrial Average and other major indices in February.
Despite the decline, the WWD Global Stock Tracker is up 5.8 percent since the beginning of the year.
At today’s bell, the S&P 500 slid 0.44 percent to 2098.53 while the Dow Jones Industrial Average slipped 0.58 percent to 18,096.9. Analysts noted there was some profit taking today, which can be expected after record-high gains. In London, the FTSE 100 also showed a profit-taking decline of 0.7 percent to close at 6,889.13.
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In the U.S., key economic indicators such as consumer savings, disposable income and job growth point to improved economic conditions. Earlier today, ADP released its National Employment Report, which showed the addition of 212,000 private sector jobs. Federal employment data is scheduled to be released on Friday.
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In the U.S retail sector, stocks were buoyed by American Eagle Outfitters Inc., which finished the day up 7.7 percent to $15.96 after posting strong quarterly results. Tugging down on the sector was Abercrombie & Fitch Co., which delivered sagging sales today. It’s stock closed the day down 15.5 percent to $20.27.
From an investor’s perspective, the U.S. retail sector has some bright spots such as the impact of cheap gas and higher rates of disposable income on sales. However, there are some headwinds facing retailers. Earlier this week, the Bureau of Labor Statistics noted that consumer expenditures slowed in January. Moreover, there is concern that operating costs in the retail sector are rising.
To that last point, Target executive vice president and chief financial officer John J. Mulligan spoke to investors at a Bank of America/Merrill Lynch Investor Conference this morning and said “there’s a significant opportunity over the next couple of years to take out $2 billion of expense, 25 percent of that in cost of goods, the rest of it in [selling, general and administrative expenses].” Target’s plan is to rethink its supply chain and squeeze out more efficiency while focusing on store-level product fulfillment.
Target’s selling, general and administrative (SG&A) costs as a percent of sales is trending up. The company’s SG&A-to-sales ratio rose 19 basis points to 21.17 percent in 2014 from 20.98 percent in 2013. The retailer, though, is not alone in facing higher SG&A costs. Kohl’s Corp. watched its ratio gain 53 basis points to 22.66 percent in 2014 from the prior year while Wal-Mart Stores Inc.’s SG&A-to-sales ratio increased 27 basis points to 19.18 percent.
Investors and analysts alike prefer declining and then stable trending in regard to SG&A-to-sales ratios.