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The President signed a bill Friday that includes an important provision for struggling retailers that likely flew under the radar since it’s more broadly recognized for extending the home buyer tax credit. The primary difference for retailers compared to the original stimulus package in February is that 1) larger businesses (above $15mm in revenues) are eligible and 2) it extends the loss carryback from 2 to 5 years for losses suffered in either 2008 or 2009. A quick screen reveals nearly two-dozen retailers that could benefit from this legislation; however, the cash realized will be material only to a select few. Given the lack of clarity of the exact accounting of the bill, we are not attempting to quantify the exact cash infusion anticipated, but merely flag those who are likely to benefit the most.

The companies that have been lobbying Congress for the loss carryback provision since February such as Liz Claiborne, Pier 1 Imports, and Office Depot are some of the retailers poised to benefit. Based on our screen of companies with either substantial losses in 2008, or over the LTM, and substantial earnings and therefore tax expenses paid from 2003 to 2008 we have identified several others including DDS, CHRS, TLB, ZLC and CROX.

Again, these aren’t the only companies that will benefit from this new legislation, but given recent liquidity concerns are likely to benefit the most from this added stimulus.

Casey Flavin

Director