NEW YORK ( TheStreet) - Retail sector stocks largely showed declines on a down day in the broader markets. However, Fossil ( FOSL), DSW ( DSW) and Michael Kors ( KORS) were bright spots in the sector. Shares of Michael Kors and Fossil surged after quarterly reports by both specialty retailers blew past Wall Street quarterly earnings estimates. Michael Kors reported fiscal first-quarter profit that rose 82% over last year to $125 million, or 61 cents a share. Revenue jumped by 54.5% to $640.9 million over the same period a year earlier. Analysts, according to Yahoo! Finance, expected the company to earn 49 cents a share on revenue of $570.5 million. Michael Kors shares rose 3.9% to $70.51. Fossil shares surged more than 18% to $127 after the company reported record earnings results. The consumer fashion accessories company, which sells watches, handbags and jewelry, reported second-quarter net income of $67.7 million, or $1.15 per diluted share. That compares to net income of $57.3 million, or 92 cents a share, in the year-earlier quarter. Fossil's net sales rose 11% to $706 million, it said. Shares of DSW surged to a new 52-week-high of $82.25 on Tuesday following the company's decision Monday to propose a 2-for-1 common stock split. The handbag and footwear retailer also raised its full-year earnings guidance to a range of $3.60 to $3.80 a share versus $3.40 to $3.60 a share previously. Second-quarter net sales rose 9% for the quarter to $558 million, while quarterly same-store sales rose 4.3% over the same period last year, DSW said. The stock was most recently trading up 4.7% to $81.21. For the most part, though, investors shunned retail stocks, including the biggest losers of the day, American Eagle Outfitters ( AEO) and J.C. Penney ( JCP). Late Monday, American Eagle cuts its second-quarter earnings guidance to 10 cents a share from a range of 19 cents to 21 cents a share and said that comparable sales dropped 7% for the quarter. Shares plummeted 14% to $17.19 at last check. Analysts gauged the earnings pre-announcement as a cautionary tale for the broader retail sector, especially as the back-to-school season ramps up this month.
Citigroup's Oliver Chen has a neutral rating on American Eagle, however in a research report, entitled "Scissors Already Out... Back-to-School Starting Off Scary," he notes that the terrible customer traffic at American Eagle "yields cautious read-throughs" to Abercrombie & Fitch ( ANF), L Brands ( LTD), Fossil Coach ( COH) and Ascena ( ASNA), among others. "We believe shopper traffic will continue to be driven by value, and the aggressive promotional environment hurt AEO's store traffic, as predicted," Chen writes. Shares of J.C. Penney also had a dismal day. The stock was one of the biggest decliners of the S&P 500 on Tuesday, declining 3.5% to $13.44 on trading volume that was 2.5 times the average three-month daily trading volume of about 9.5 million shares. Shares are down 18% since J.C. Penney's closing price on Tuesday, July 30 - the day before reports surfaced that the retailer was having credit issues. The New York Post reported on Wednesday, July 31 that CIT Group ( CIT) "abruptly stopped financing deliveries" from smaller manufacturers that sell to J.C. Penney. J.C. Penney responded to the report on Thursday, Aug. 1 saying that the rumor was untrue. Investors, however, remain skittish surrounding this stock over concerns that perhaps the retailer's financial troubles are more dire than previously thought, as TheStreet.com contributor Robert Weinstein points out in his J.C. Penney article. Also see: J.C. Penney Survival Guide Rumors were apparently also circulating that CFO Ken Hannah was stepping down, although the company denied the rumor to CNBC on Tuesday. CNBC said that CEO Mike Ullman has assembled his senior executive team and it does include Hannah. The company announced on Monday that Debra Berman, a former Kraft Foods ( KRFT) executive, assumed the vacant position of senior marketing executive. -- Written by Laurie Kulikowski in New York. Follow @LKulikowski To contact Laurie Kulikowski, send an email to: Laurie.Kulikowski@thestreet.com. >To submit a news tip, email: email@example.com. Follow TheStreet on Twitter and become a fan on Facebook.