Shares of retail stocks, including Gap Inc. (GPS) and AnnTaylor Stores Corp. (ANN), dropped Monday as some investors were disappointed the surge of traffic after the Thanksgiving holiday wasn't higher and others fretted that product offerings weren't strong enough to create better sales.
Black Friday, the day after Thanksgiving, is considered the traditional start of the holiday shopping season. It's the day when retailers hope sales will be strong enough to ensure they make a profit for the quarter and the year.
Retail stocks slipped after a recent rally, with women's business and casual clothing retailer AnnTaylor leading a 1.4 percent decline in the Dow Jones U.S. apparel retailers index . AnnTaylor Shares dropped 3.2 percent to $30.12 on the New York Stock Exchange.
"The market has discounted good numbers by now," said Jim Herrick, head of equity trading at Robert W. Baird & Co.
Investors, he added, "were expecting numbers that were too good at this point."
Investment bank and brokerage Merrill Lynch echoed the sentiment.
Retail stocks rose 6.4 percent for the month of November to date, compared with a 5 percent increase for the S&P 500, according to Merrill Lynch.
"However, the rally seems to be coming to an end," analyst Mark Friedman wrote in a note to clients. "Much like the weather and traffic around the malls, retail stocks historically have been sloppy in December. We maintain our defensive stance on the group and look for shares to struggle in December as holiday concerns take center stage."
Friedman added that there was a "lack of fashion newness" and "must have" appeal.
The holiday retail season got off to a slightly slower start as retail sales for the season's first two days dipped 0.5 percent, compared with the same two-day period in 2004, according to ShopperTrak RCT Corp.'s National Retail Sales Estimate.
ShopperTrak's take on the start of the holiday shopping season contrasted with a report from the National Retail Federation, a Washington-based trade group. The NRF said sales over the post-Thanksgiving weekend jumped 22 percent from the same period a year ago. This year, the NRF said shoppers spent $27.8 billion in stores and online during the long weekend, which includes Black Friday.
Among declining retail stocks in Monday morning trading, Gap was down 1 percent, or 17 cents, at $17.54, and Abercrombie & Fitch Co. (ANF) was down 1.4 percent, or 88 cents, at $61.99, both on the NYSE. Shares of American Eagle Outfitters Inc. (AEOS) was down 3.4 percent, or 83 cents, at $23.28 in Nasdaq trading.
Advancing stocks in this sector included discount retailer Ross Stores Inc. (ROST), up 1 percent, or 26 cents, at $27.25 on Nasdaq.
Only three stocks in the 28-member Dow Jones U.S. apparel index were higher.