Retail Sales Good Despite Discounting
By REUTERS Filed at 11:40 a.m. ET
NEW YORK (Reuters) - January proved to be a markdown month for most U.S. retailers after a disappointing holiday season, but while some chains benefited from last month's selling spree, others warned of major earnings shortfalls as a result of the discounting.
While retailers for the most part posted same-store sales -- or sales at stores open at least one year -- in line or slightly above analysts' estimates, many admitted that they expect gross margins to take a hit later in the year because of the deep markdowns they resorted to in order to make room for spring merchandise.
``Granted, the weather cooperated and retailers used plenty of promotions to clear the shelves of winter merchandise, but I think the important point is that January demonstrates consumers will spend if the conditions are right,'' said Steve Paspal, retail analyst with John Hancock Funds.
``Consumers responded to enticements,'' Paspal said. ``They are not so scared of a recession that they are cowering in their homes.''
LIMITED, TALBOTS SEE STRONGER Q4
Limited Inc. (LTD.N), which analysts had expected to post flat comparable sales, reported a 5 percent increase as it resorted to significant markdowns to ready for spring.
The Columbus, Ohio-based Limited, which operates Express, Limited and Lane Bryant stores, also said it expects to post earnings of 53 to 57 cents a share for its just-ended fourth quarter and between 95 and 99 cents for the full year.
Analysts polled by research firm First Call/Thomson Financial were expecting profits of 55 cents a share for the quarter and 97 cents for the year.
Shares of Limited were down 3.4 percent, or about 67 cents, trading at $19.10 on the New York Stock Exchange.
Another women's specialty apparel retailer, Talbots Inc. (TLB.N), gave upward guidance for its fourth-quarter earnings, saying it expected to beat analysts' consensus estimates.
The Hingham, Mass., company, whose same-store sales rose 4.1 percent in January against flat to negative expectations from analysts, said it expects to post fourth-quarter earnings per share of between 49 and 51 cents, above the 48 cents analysts were expecting, according to First Call.
``Talbots had really good numbers and again estimates were increased,'' said Marcia Aaron, retail analyst with Deutsche Banc Alex. Brown.
``While they do have difficult comparisons, as long as they continue with great fashion we think that this is a company that has the ability to still post decent same-store sales and exceed expectations,'' Aaron said.
Talbots shares were down 3.5 percent, or about $1.88, trading at $51.87 on the Big Board, near their 52-week high.
ANNTAYLOR, GAP WARNINGS
On the other end of the earnings spectrum, women's apparel retailer AnnTaylor Stores Corp. (ANN.N) said fourth-quarter profit will come in at only 18 cents a share before charges, compared with a First Call consensus estimate of 38 cents.
Same-store sales at AnnTaylor fell 14.3 percent in January, while analysts had expected a drop of only 2 percent for the month. The New York-based company said it expects to report earnings of $1.95 a share for the year ended Feb. 3, versus the First Call estimate of $2.16.
Fiscal 2002 earnings were expected to come in between $2.24 and $2.28 a share, compared with the First Call analysts' forecast of $2.46.
AnnTaylor's shares fell 3.3 percent, or about 92 cents, by midday on the New York Stock Exchange.
Analysts said AnnTaylor's woes reflected its comparative inability to effectively target customers with the right styles and colors. Because of the retailer's continued difficulty in doing that, some even believe that it could be a potential takeover target.
``AnnTaylor clearly acknowledged that they didn't have the right merchandise in stores, which reflects on management,'' said Kurt Barnard, president of Barnard's Retail Trend Report.
``In the next year it's going to be a very difficult year,'' Barnard said. ``There will be some restructuring taking place and I would not be surprised if AnnTaylor were to be absorbed by somebody else better able to run their company.''
Another major earnings warning came from No. 1 U.S. apparel retailer Gap Inc. (GPS.N), which said same-store sales fell 12 percent against an expected drop of 4 percent to 7 percent.
The San Francisco company said it now expects fourth-quarter earnings per share of 30 cents to 31 cents, below the 33 cents that analysts on average were expecting.
Gap shares were down 9.34 percent, or about $2.80, trading at $26.76 on the New York Stock Exchange.
WAL-MART MEETS SALES VIEWS
Wal-Mart Stores Inc. (WMT.N), the world's No. 1 retailer, met the top end of analysts' expectations, posting a 6.0 percent rise in same-store sales for January.
Rival discounter Target Corp. (TGT.N) said sales came in at the low end of plan, rising 2.1 percent for the month.
Wal-Mart shares were down 2.4 percent, or about $1.30, trading at $53.36 on the New York Stock Exchange, while Target shares were down 5.21 percent, or about $2, trading at $34.78.
J.C. Penney Co. Inc. (JCP.N) said its same-store sales for the quarter for its department stores fell 6 percent, while those at its Eckerd drugstore chain rose 11.2 percent. Shares of J.C. Penney were down 7.6 percent, or about $1.16, trading at $14.25 on the Big Board.
Same-store sales for Sears Roebuck & Co. (S.N) came in slightly above plan with a 2.6 rise for the month, while sales for Kmart Corp. (KM.N) rose 4.3 percent, well above the 1 to 3 percent rise analysts were expecting.
Sears saw its shares fall almost 4 percent, or about $1.46, to $37.40 on the New York Stock Exchange, while Kmart shares were up slightly trading at $8.95.
Federated Department Stores Inc. (FD.N), which said it would close its Stern's department store division, said sales rose 3.7 percent, above the 1 to 3 percent rise that was expected.
Federated said it plans to convert most of the New York and New Jersey Stern's outlets to Macy's and Bloomingdale's stores and could lay off as many as 2,600 of the division's 7,400 employees.
Shares of Federated were down about 3.5 percent, or $1.54, trading at $44.40 on the New York Stock Exchange. |
