Abercrombie & Fitch Co (NYSE: ANF), the provider of shopping bags with buff young men with shaved chests, reported a 13% drop in same store sales for the month yesterday. For the first quarter, a little over one month ago, comp sales increased 1%. This is a pretty big swing.

Hollister's comps were also down big, declining 17%. Hollister reported an 8% increase in comps for its 2007 first quarter.

Foot Locker Inc (NYSE: FL), another retailer to fashion-conscious teenagers, also came in with light comps, reporting a 5.1% decline. Investors now have to question whether Motorola Inc's (NYSE: MOT) weak 2007 performance has to do with a saturated wireless handset market or parents cutting back on the financial life support for their teenagers.

Broad-based weakness for apparel retailers follows very weak results for home-improvement retailers and some lightness in Whole Foods Market Inc (NASDAQ: WFMI) and Starbucks Corporation (NASDAQ: SBUX) comps.

Retail data points clearly demonstrate that the Fed's interest-rate increases are doing its job. No matter how compelling a shopping-bag marketing strategy is to drive teenage-girl traffic into stores, at the end of the day, when the Fed wants to cut down on consumption, it is all powerful -- no matter how much complaining a teenage daughter can do.

Foot Locker's (NYSE: FL) initial bid of $46 per share for Genesco (NYSE: GCO) was rejected by the company's board as being inadequate. Foot Locker operates over 3,400 stores in the United States, Canada, Europe, Australia, and New Zealand. The company is primarily known for selling athletic footwear, and its workers wear black and white striped shirts modeled after those worn by football referees.

Genesco is the owner of Journeys, probably the coolest footwear store going, as well as Lids and several other brands including Johnston & Murphy. An acquisition of Genesco would be a way for Foot Locker to expand out of basketball/tennis shoes, and move toward targeting a broader market.

It's not surprising that Genesco's board unanimously rejected the offer as the stock is currently trading at over 50 dollars, indicating that investors think the company is worth more. According to Hal Pennington, CEO of Genesco, Foot Locker's CEO Matthew Serra said in a discussion "'Of course, we can go higher,."

Now I don't claim to be a negotiating expert. But when you offer someone 46 a share and say "Of course, we can go higher," how can you reasonably expect them to take the offer? If Foot Locker's CEO said they would go higher, Genesco had no choice but to reject the offer.

Burlington Northern Santa Fe Corp. (NYSE: BNI) -- implied volatility low; suggests less Risk as Buffett buys. BNI, an operator of 32,000 railroad route miles, is recently up $6.05 to $88.71. Form 4 filed with the SEC.gov revealed Warren Buffett holding company BRK purchased 1,646,900 shares worth $133.967,245 on 4/4/07-4/5/07. BNI May option implied volatility of 24 is below its 52-week average of 27 according to Track Data, suggesting larger price fluctuations.

Foot Locker Inc. (NYSE: FL) -- April 25 & May 25 calls trading on renewed & unconfirmed Chatter. FL, a footwear & apparel operator of 3,950 retail stores, is recently up $.28 to $23.85 on renewed & unconfirmed takeover chatter. FL April 25 calls have traded 62 times on transaction volume of 1,716 contracts, above its open interest of 1,300 contracts. FL May option implied volatility of 31 is near its 26-week average according to Track Data, suggesting slightly higher price risks.

The Volatility Index for S&P 500 Options (VIX) is up .04 to 13.27.

Option volume leaders today are: Dow Chemical Co. (NYSE: DOW), Intel Corp. (NASDAQ: INTC), Dendreon Corp. (NASDAQ: DNDN) and Research in Motion, Ltd. (NASDAQ: RIMM).

Daily Option Update is provided by Stock Options Specialist Paul Foster of theflyonthewall.com.

MAJOR PAPERS:

• The Wall Street Journal (subscription required) reported that Kraft Foods Inc (NYSE: KFT), looking to make foreign acquisitions, is giving its international managers more power to engineer deals. Kraft is most interested in acquisitions in Russia, Ukraine, Brazil and Mexico, according to a person familiar with the matter.
• According to Barron's Online's (subscription required) "Weekday Trader" column, Corn Products International Inc's (NYSE: CPO) recent 17% drop could be a buying opportunity.
• According to the Financial Times (subscription required), Bertelsmann has joined forces with private equity partners to consider a bid for textbook publisher Thomson Corporation (NYSE: TOC). The asking price is about $5B.

OTHER PAPERS:

• Several private equity firms, including Kohlberg Kravis Roberts, Bain Capital and Texas Pacific Group, have shown a strong interest in acquiring the beverage arm of Cadbury Schweppes ADS (NYSE: CSG) reported the U.K. Times.
• The New York Post reported that WPP Group plc ADS (NASDAQ: WPPGY) has Hollywood ambitions, taking a 6.8% stake in Media Rights Capital, partly owned by talent agency Endeavor.
• Investor's Business Daily's "New America" column mentioned shoe maker Sketchers USA Inc (NYSE: SKX) positively, noting that the company's presence has increased significantly in stores like Foot Locker Inc (NYSE: FL) and Finish Line Inc (NASDAQ: FINL).

It has been an extremely busy week for rumors, with numerous companies' names being floated about. Here's a few of the more notable rumors:

Business Objects S.A. (NASDAQ: BOBJ)

All week long there have been rumors that the global provider of business intelligence software solutions has been the target of a takeover. The company's shares are rallying today as Oracle Corporation (NASDAQ: ORCL) could be making its move. Previously, Oracle has singled out Business Objects as a possible target. What's different this time is that while Business Objects always says they're not interested in selling, they're not saying that now.

USG Corp. (NYSE: USG)

Warren Buffett. Yes, him. If he shows an interest, a company's stock goes up, and USG, the manufacturer and distributor of building materials, which counts U.S. Gypsum as a wholly owned subsidiary, is seeing its stock go up. Will Buffet raise his stake, or just out and out buy the company? Last report was that Buffett's Berkshire Hathaway (NYSE: BRK.A) owns about 19%. of the company. Stay alert.

Foot Locker (NYSE: FL)

For months the global retailer of athletic footwear and apparel has been outdistancing the rumors of a company sale as its shares have continued to slip and fall. Even CEO Matthew Serra made a point of saying that there's nothing to it. But it's hardly news that sales and earnings have been flat for years. Last summer the company hired Evercore Partners as an advisor, and Pathenon Group to look them over. So whatever is up, is certainly can't be very comforting to hear that Nike Inc (NYSE: NKE) is planning to open a series of mall-based specialty stores. Foot Locker is a major reseller of the Nike brand.