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Clearance Drives Retailers’ Revenue

Retailers reporting second-quarter results Thursday delivered consistently robust sales gains, suggesting summer clearance events worked and that early back-to-school promotions at the teen retailers were successful.

Retailers reporting second-quarter results Thursday delivered consistently robust sales gains, suggesting summer clearance events worked and that early back-to-school promotions at the teen retailers were successful. Profits, however, were another story.

Earnings fell at New York & Company Inc. and Stein Mart Inc., while The Wet Seal Inc. and Buckle Inc. delivered standout performances. Several retailers offered cautious outlooks for the second half.

The bulk of retailers reported results early Thursday while Pacific Sunwear of California Inc., Bebe Stores Inc., Gap Inc. and Aéropostale Inc. released quarterly numbers after the market closed.

At New York & Co., second-quarter earnings plummeted 46 percent as the company slashed its full-year guidance. For the three months ended Aug. 4, earnings fell to $3.5 million, or 6 cents a diluted share, from $6.5 million, or 11 cents, in last year’s period as sales for the quarter increased 11 percent to $294.4 million from $264.8 million. Total same-store sales rose 4.7 percent in the quarter.

The company lowered its full-year earnings forecast to a range of 47 cents to 58 cents a diluted share, from previous guidance of 85 cents to 92 cents a diluted share. New York & Co. expects third-quarter earnings in the range of 1 cent to 6 cents a diluted share.

Stein Mart posted second-quarter results that declined year-over-year and issued third-quarter guidance below Wall Street’s expectations. Stein Mart earned $2.2 million, or 5 cents a diluted share, in the quarter — down from $8.3 million, or 19 cents a diluted share, in the year-earlier period. Revenue came in at $330.1 million, down from $336.3 million in 2006’s second-quarter.

Analysts expected the discount retailer to report earnings of 5 cents a share on revenue of $333.3 million. Stein Mart forecast a third-quarter loss between 3 cents a share and 6 cents a share; analysts are looking for third-quarter income of 4 cents a share.

At the bell, Bebe Stores reported a decline in operating income and earnings for its fourth quarter on a sales gain of 6.9 percent as the retailer took higher markdowns.

Net earnings fell 10 percent to $19.7 million, or 21 cents, from $21.9 million, or 23 cents, in the prior year on sales that rose to $162.7 million from $152.2 million. Same-store sales declined 5.7 percent. Operating income dropped 12.8 percent to $25.1 million from $28.8 million.

This story first appeared in the August 24, 2007 issue of WWD.  Subscribe Today.

The retailer said gross margin as a percent of net sales decreased to 48.1 percent from 50.5 percent in the prior year and “was primarily due to higher markdowns and unfavorable occupancy leverage partially offset by higher initial markup.”

For the year, earnings rose 4.7 percent to $77.3 million, or 81 cents, from $73.8 million, or 79 cents, in the previous year on sales that climbed 16 percent to $670.9 million from $579.1 million.

Mall-based teen retailer Aéropostale reported earnings that rose 75 percent to $14.7 million, or 19 cents a share, from $8.4 million, or 10 cents a share, in the prior year on sales that gained 13 percent to $311.2 million from $274.6 million. Aéropostale said it expects third-quarter earnings in the range of 43 cents to 45 cents a diluted share.

Pacific Sunwear delivered a loss of $10.5 million, or 15 cents a share, in the second quarter, which compares to net income of $9.7 million, or 14 cents, in the year-ago period as sales rose 9.2 percent to $344.2 million from $313.7 million. The surf-inspired apparel company expects third-quarter earnings of 10 cents to 13 cents a diluted share.

Earlier in the day, Deb Shops Inc. reported a 5.1 percent jump in second-quarter earnings to $6.2 million, or 43 cents a diluted share, from $5.9 million, or 41 cents, last year on a sales gain of 27.5 percent to $77.7 million from $75.7 million. During the quarter the teen retailer announced that Lee Equity Partners LLC will acquire the company for $27.25 a share. The company will no longer provide guidance and has canceled its second-quarter conference call.

At The Wet Seal, earnings surged 53 percent to $6.8 million, or 7 cents a diluted share, from $4.4 million, or 4 cents. For the three months ended Aug. 4, sales rose 10.6 percent to $143.3 million, from $129.5 million, while total same-store sales fell 1.7 percent.

The company expects difficult traffic trends in the specialty sector to continue, and anticipates third-quarter earnings in the range of 7 cents to 10 cents a diluted share.

The Bon-Ton Stores Inc. narrowed its loss to $15 million, or 91 cents a diluted share, from a loss of $19.8 million, or $1.20, in the year-ago period as sales for the quarter dropped 51 percent to $708.6 million from $746.8 million.

The company cut its full-year forecast, now expecting earnings in the range of $2.75 to $2.90 a diluted share. “While uncertainty regarding consumer confidence persists, we believe we have the right initiatives in place to achieve our revised guidance for the year and our longer-term objectives,” said Bud Bergren, president and chief executive officer, in a statement.

Buckle reported net income up 44.6 percent year-over-year, easily beating Wall Street estimates. The denim-themed retailer posted net income of $11.8 million, or 38 cents a diluted share, up from $6.6 million, or 22 cents a share, in the year-earlier period. Analysts expected the company to post earnings of 32 cents a share. Revenue rose 17.5 percent to $124.3 million from $102.4 million.