NEW YORK — Charming Shoppes managed to post a first-quarter profit, but weakness at Lane Bryant contributed to a steep drop in operating income.
Also, the plus-sized specialty retailer, which trails only Gap and Limited Brands in apparel volume among U.S. specialty stores, warned its second-quarter and full-year earnings would fall below Wall Street’s expectations.
The Bensalem, Pa.-based firm, which operates a fleet of 2,245 apparel stores including Lane Bryant, Fashion Bug and Catherines Plus Sizes, said net income reached $9.7 million, or 8 cents a share, for the three-month period ended May 3, including a pre-tax expense of $4.4 million because of its cost-reduction plan. Results were at the low end of its previously lowered forecast and a penny ahead of Wall Street’s best guess. In the year-ago period, CS reported a net loss of $31.8 million, or 24 cents, including an accounting charge, the exclusion of which would have allowed CS to post net income of $17.3 million, or 14 cents. Operating income contracted 44.2 percent, to $19.1 million from $34.2 million.
Sales slid in the quarter to $564.3 million, a drop of 10.5 percent over $630.6 million, while same-store sales decreased 6 percent. CS operated 170 fewer stores at the end of the quarter than it did a year earlier.
Dorrit J. Bern, chairman, chief executive and president, said the Lane Bryant business continues to underperform as “we continue to sell through spring apparel assortments that have not met with customer acceptance.”
The company has said it has put a turnaround plan in place for LB, noting it expects improved merchandise mixes for the fall 2003 season.
“We continue to be affected by a weak economic environment, resulting in soft consumer demand for apparel,” Bern said in a statement. “As a result, we did not meet our sales plan for the quarter, primarily attributable to lower traffic levels in our stores.”
The firm said it was able to offset soft sales by reducing expenses as well as strong inventory management, which resulted in improved margins at Fashion Bug and Catherines Plus Sizes stores.
For the second quarter, CS projects earnings per share in the range of 12 to 14 cents, below the current Wall Street forecast of 16 cents. For the full fiscal year, the company expects earnings in the range of 26 to 28 cents, below consensus estimates of 31 cents, sales of about $2.3 billion and comps in the negative low-single digits.
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