It appears most retail management are
theifs too:-)
Retailers' Discounting Seems
To Do Little to Improve Results
By BARBARA MARTINEZ
Staff Reporter of THE WALL STREET JOURNAL
An aggressive round of Christmas-week discounting apparently didn't do
much to help retailers meet their already modest sales expectations, and the
markdowns are leading some analysts to question their fourth-quarter
earnings forecasts.
For weeks, retailers have been saying it ain't over till it's over, predicting that
procrastinating shoppers would finally come through for them in the last days
before Christmas as well as in the few days just after the holiday.
But sales "didn't pick up enough to change the picture for the month," said
Linda T. Kristiansen, an analyst at Schroder & Co.
Deep Markdowns Hurt Retailers
ÿ
Retailer
ÿÿÿPrice
ÿÿÿ12/15
ÿÿÿÿPrice
ÿÿÿÿ12/26
ÿ
ÿÿÿ% Chg.
ÿDayton Hudson
ÿÿÿ$71.31
ÿÿÿ$62.13
ÿÿÿ-13.0%
ÿFederated Dept. Stores
ÿÿÿÿÿ45.81
ÿÿÿÿÿ40.25
ÿÿÿ-12.0
ÿDillard's
ÿÿÿÿÿ35.88
ÿÿÿÿÿ32.69
ÿÿÿÿÿ-8.9
ÿWal-Mart Stores
ÿÿÿÿÿ41.13
ÿÿÿÿÿ37.56
ÿÿÿÿÿ-8.7
ÿJ.C. Penney
ÿÿÿÿÿ62.75
ÿÿÿÿÿ57.50
ÿÿÿÿÿ-8.4
ÿSears, Roebuck
ÿÿÿÿÿ45.19
ÿÿÿÿÿ41.88
ÿÿÿÿÿ-7.3
ÿMay Dept. Stores
ÿÿÿÿÿ54.00
ÿÿÿÿÿ50.31
ÿÿÿÿÿ-6.8
Profitability has been hurt by promotional activity that began just before
Christmas, said Jeffrey M. Feiner, a Lehman Brothers analyst. As a result, he
has lowered his previous fourth-quarter profit-growth forecast of between
15% and 18% to a maximum of 15%, "and that could be optimistic," he
added.
While many analysts have been ratcheting down sales projections throughout
December and sounding the alarms for a possibly painful markdown period,
this past week brought final confirmation of how steep the discounts could be.
"It looks like markdowns are going to be deeper than last year," Ms.
Kristiansen said.
As a result, Ms. Kristiansen said, earnings forecasts "for most companies in
the industry are at risk for downward revision." Further, she said, "retail
stocks are likely to continue to underperform over the next few weeks as
[earnings per share] estimates are lowered."
Salomon Smith Barney analyst Richard Church said he is considering
lowering his earnings estimates on some companies for the fourth quarter
even though "I actually had conservative expectations, I thought."
A few analysts have already cut their fourth-quarter earnings estimates.
Most analysts agreed that Sears, Roebuck & Co. and J.C. Penney Co. have the
biggest downside risk of earnings-forecast adjustments, though Mr. Church
also raises questions about May Department Stores Co., Dillard's Inc. and
"possibly" Federated Department Stores Inc. He noted that part of Sears's
problems stem from its credit-card business.
Ms. Kristiansen, however, said she thinks earnings forecasts for Federated
won't be revised, and also said Wal-Mart Stores Inc. and Dayton Hudson
Corp. are likely to meet current expectations.
Mr. Feiner, who expects fourth-quarter estimates to be lowered for most of
the midprice retailers, said he only expects "minor reductions" in the
estimates. He said that is because lower operating earnings could be offset by
two things: lower-than-expected charges for adjusting inventory because of
low inflation, as well as lower interest costs.
David Poneman, an analyst at Sanford C. Bernstein, said results in the fourth
quarter will be especially disappointing in light of the fact that retailers
exceeded estimates in the first three quarters of the year.
Isaac Lagnado, president of Tactical Retail Solutions, a New York
market-research firm, singled out women's apparel makers as a group that has
to "resort to some brutal markdowns." Winter inventory must be cleaned up
"fast because spring arrivals begin in February," he said.
But some retailers said that there is still some time left on the clock, as many
of the companies' fiscal fourth quarters include most of January. A Sears
spokeswoman noted that for the department store, which began a 50%-off sale
on Friday, the next two weeks "are going to be important in determining the
outcome of our total season."
Sears was joined in its move by Saks Holdings Inc.'s Saks Fifth Avenue stores,
where an advertisement this past weekend invited shoppers to "take an
additional 40% off already reduced prices on selections for men and women."
Similarly, at Federated's Bloomingdale's stores, ads said, "save 44% to 77%
when you take an extra 30% off thousands of already reduced winter
fashions."
"We're not going to comment on rumblings on Wall Street," a Penney
spokeswoman said, "specifically because we have the whole month of January
before the quarter ends."
The spokeswoman added that sales on Christmas Eve were "very positive, and
we do expect to make our Friday and Saturday estimate, which will result in a
good week for the company."
But investors have been dropping retail stocks, especially department-store
shares. Many of those shares are off almost 10% since Dec. 15 as it became
clearer that sales weren't adding up to expectations. Federated shares are
down 12% since Dec. 15, while Sears has fallen 7.3%, and J.C. Penney is
down 8.4%.
Mr. Church of Salomon Smith Barney says "this time of year tends to be
fluid," and that revising earnings numbers isn't uncommon, as unpredictable
shoppers begin to make their mark on the season. Noting stocks' weakness
right now, he says, "over the next year some of these stocks will start looking
more appealing again."
Glenn |
