Last updated: November 16, 2010 10:23 pm

Show of retail strength fails to halt wider US retreat

Concerns about the risks of Chinese inflation and Eurozone sovereign debt overshadowed increases in forecasts from US retailers Walmart and Home Depot .

All 10 main sectors of the S&P 500 fell more than 1 per cent. The materials and energy sectors led the decline, losing more than 2 per cent as they followed commodity prices lower.

The S&P 500 closed down 1.6 per cent at 1,178.36, the Dow Jones Industrial Average had also lost 1.6 per cent to close at 11,023.50 and the Nasdaq Composite closed 1.8 per cent lower at 2,469.84.

However, a flurry of retailers reporting earnings helped the S&P 500 retail index limit its losses to just 0.6 per cent.

Walmart, the world’s largest retailer by sales, added 0.8 per cent to $54.50 after it raised its full-year guidance. Earnings rose during the quarter as income from international operations jumped.

Elsewhere in retail, Home Depot also lifted its full-year earnings outlook even though the home improvement retailer cut its forecast for sales growth.

In the third quarter it outperformed Lowe’s as same-store sales increased 1.5 per cent compared with largely flat sales at its rival.

Shares in Home Depot added 1 per cent to $31.71 while Lowe’s shares rose 0.5 per cent to $21.57.

Saks and Nordstrom saw a rise in luxury spending. But Saks fell 1.4 per cent to $11.16 after it reported an unexpectedly high quarterly profit as sales rose. The high-end department store chain forecast a mid-single digit rise in sales during the fourth quarter.

In contrast, department store owner Nordstrom narrowed its forecast for the full year to a range below average analyst expectations. Nordstrom shares dropped 3.1 per cent to $40.55 even though surging sales helped the retailer report a better-than-expected profit for the quarter.

Liz Dunn, an analyst at FBR Capital Markets, said there could be upside to the retailer’s guidance if the high-end customer continued to show resilience.

Competing department store stocks also fell, with Macy’s losing 2.2 per cent to $24.15 and Kohl’s nudging down 0.6 per cent to $50.65.

Among other retailers announcing their earnings, clothing chain Abercrombie & Fitch beat expectations.

International demand helped Abercrombie & Fitch and the shares, which have risen 29 per cent since the retailer reported its second-quarter earnings in August, advanced 0.8 per cent to $45.68.

Sales from the Urban Outfitters website and the fashion retailer’s catalogues jumped 31 per cent in its third quarter, helping total sales rise by double-digits and lifting the chain’s earnings above expectations. Shares in the chain rose 11.9 per cent to $36.64.

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