By  on June 27, 2005

NEW YORK — Last year was great for Charming Shoppes Inc., and this year may even be better. That was the message to shareholders during last week's annual meeting.

"We made great progress during 2004, with a 70 percent increase in net income," Dorrit J. Bern, chief executive officer, president and chairman of the Bensalem, Pa.-based company, said in a statement. "We also saw solid improvement in our gross margin of 160 basis points."

Charming Shoppes' success in 2004 is attributed to the company's focused merchandise offerings at Lane Bryant, strong increases in its e-commerce business and improved performance of its credit portfolio, Bern told shareholders at the meeting, which was held at the company's Catherines Plus Sizes headquarters in Memphis.

Meanwhile, Bern said bottom-line results for the first quarter of 2005 were robust, signaling a strong start to the year. And at least one analyst is bullish on the retailer's second-half prospects. In the first quarter, the company posted net income of $30 million, which is a 14 percent year-over-year increase.

"We began 2005 strongly, reporting record earnings in our first quarter," Bern said. "We also announced the strategic acquisition of Crosstown Traders Inc., which accelerates our growth as a multichannel retailer."

In a research note last week, Mark Montagna, Wells Fargo Securities LLC equity analyst, said he expects Charming Shoppes to outperform expectations for the second and third quarters of 2005. Earlier this month, Montagna reiterated a "buy" rating on shares of Charming Shoppes. He raised his 12-month price target to $11 from $10. Shares are now trading around $9, which is near the top of its 52-week high of $9.64.

The analyst's report followed the retailer's May same-store sales report that showed a 2 percent decline.

"On the surface, the May comp decline of 2 percent would appear disappointing," the analyst wrote. "Below the surface, it was highly encouraging."

Montagna explained that Lane Bryant delivered gross margin growth in the first quarter while inventories at Catherines were down 15 percent. "The spring and summer assortment [at Catherines] comped up 15 percent, which is good for margins," he added.

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