Venator Chief Backs Fourth-Quarter EPS View
By Suzanne Kapner
Senior Writer
3/2/99 3:23 PM ET
Despite the troubles Venator (Z:NYSE) is facing, Chief Executive Roger Farah said he feels comfortable with the First Call consensus earnings estimate for the fiscal fourth quarter of 23 cents per share.
Farah made the comment at a Bear Stearns conference Tuesday, and Venator issued a press release highlighting his remarks. In the year-earlier period that ended last January, Venator earned $115 million, or 85 cents a share. Venator is expected to report earnings on March 10.
In recent months, Venator's Foot Locker stores have been running aggressive promotions, marking merchandise off by 50% or more to clear out slow-moving goods. Analysts had worried that the heavy markdowns would eat into fourth-quarter earnings.
"The most important thing is they will make fourth-quarter estimates," says John Shanley, an analyst with Van Kasper who has been waiting until the company reports earnings before initiating coverage. (His firm hasn't done any underwriting for Venator.)
Venator's fourth-quarter bottom line should receive a boost from the $137.5 million the company received in December when it sold its corporate headquarters. In an attempt to restructure, the company has been selling divisions and assets. In October, Venator sold its German unit for $550 million. But as the company runs out of assets to sell, the performance of its core specialty stores, under the Foot Locker, Lady Foot Locker, Kids Foot Locker, Champs Sports and Colorado names, will become crucial.
In a nod toward the difficulties facing the athletic-wear industry in general and Venator more specifically, Farah said the company would cut capital expenditures in fiscal 2000 to $175 million from $550 million in the year that ended in January. In addition, Farah said the company would cut $100 million from operating expenses. To do so, the company says it will reduce its corporate overhead to 1% of sales by 2001. Given the company's restructuring, it's tough to find comparable figures from previous years.
Venator also said it formed an e-commerce subsidiary, eVenator. The company already sells merchandise on its Foot Locker Web site and will use its direct-marketing subsidiary Easbay to handle back-of-house operations.
Additionally, Farah noted that Venator expects to have its amended revolving credit facility in place by March 19.
By early afternoon, shares had gained 5/16 to 5 1/4 on extremely heavy volume.
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