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CNBC ON DIGG

Retails Reeling

Published: Thursday, 9 Jul 2009 | 10:34 AM ET

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By: Bob Pisani
Reporter

Bob Pisani is off today, this was written by CNBC producer Robert Hum

Stock futures are up modestly on better-than-expected jobless claims data and Alcoa’s smaller-than-expected loss.

Already up after Alcoa’s results, futures popped up another 4 points following a “less bad” weekly jobless claims report. Jobless claims fell 52,000 to 565,000, below economists’ estimates of 603,000. Continuing jobless claims continued to hit record levels though, rising 159,000 to 6.883 million.

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Additionally, the dollar is noticeably weaker today, hitting a 1-week low, helping commodities rebound in early morning trade.

Many commodity stocks are up modestly in pre-market trading on the weaker dollar and Alcoa’s earnings report.

Alcoa [AA Loading... () ] shares are up 6 percent pre-open after the aluminum producer reported a narrower-than-expected loss for its second quarter. It was the company’s third straight quarter loss.

Cost cuts continued to help, but as expected, the aluminum giant also benefited from a 9 percent increase in aluminum prices from the prior quarter. Hampering its ability to be profitable, sales fell 41 percent from the year-ago quarter, largely due to the 49 percent drop in aluminum prices from Q2 of last year.

Although conditions have been improving slightly (particularly in the auto sector), demand is still expected to be weak, with the company reaffirming its expectations for a 7 percent decline in worldwide aluminum consumption this year. Additionally, Alcoa’s CEO cautioned that there are continuing signs of a cyclical downturn in aerospace and continued weakness in the industrial gas turbine market.

Still a Disappointing Retail Picture

Retailers continued to cite weak store traffic in their June sales reports. Same-store sales continued to decline across the board with several retailers posting double digit declines last month: Gap down 10 percent, Limited down 12 percent, American Eagle down 11 percent, Abercrombie & Fitch down 32 percent, Dillard’s down 14 percent, Nordstrom down 10 percent, Wet Seal down 11 percent.

Few retailers beat sales estimates, and those that did were primarily big box discounters or off-priced retailers like BJ’s Wholesale, Costco, TJX and Ross Stores. While Target’s sales fell below estimates, the discounter said Q2 earnings per share will meet or exceed the consensus forecast of 64 cents as margins have improved. Keep in mind that retail giant Wal-Mart is no longer reported monthly sales or guidance.

RETAIL STOCKS

Premium-priced brands also seemed to suffer as consumers remained reluctant to spend on higher-priced items in the difficult economic environment.

1) Take a look at Gap, whose same-store sales fell 10 percent. Gap brand sales also fell 10 percent, but its more upscale Banana Republic stores saw comp. sales drop 20 percent.

2) Neiman Marcus also saw its June same-store sales fall 21 percent.

3) Additionally, while Saks [SKS Loading... () ] beat sales estimates in June (down 4.4 percent vs. down 11.5 percent est.), the high-end department store cited the shift of their designer sale event from May to June as the reason for the improved performance. Keep in mind that comp. sales for the luxury retailer’s current quarter are still expected to fall in the mid teens. Furthermore, with no earnings guidance provided, how much pressure that sale event will put on profit margins is still unclear.