By  on August 23, 2007

Specialty apparel retailers such as Tween Brands, Talbots and Charming Shoppes reported dismal second-quarter earnings on Wednesday, hurt by decreased store traffic and weak demand for spring and summer merchandise. But teen retailers Abercrombie & Fitch Co. and Zumiez Inc. stood out from the pack with robust results.

Meanwhile, stocks rallied on Wall Street as investors continued to digest the Federal Reserve's discount rate cut last week and speculated if the Fed will cut its federal fund target rate — which could boost consumers' spending power.

The Dow Jones Industrial average rose 1.1 percent to 13,236.13 while the New York Stock Exchange added 1.6 percent to 9,477.13. The S&P 500 gained 1.2 percent to 1,464.07, and the Nasdaq increased 1.3 percent to 2,552.80.

The S&P Retail Index outpaced them all, closing up 1.8 percent to 477.82.

After the market closed, Abercrombie & Fitch posted a 24 percent jump in second-quarter earnings to $81.3 million, or 88 cents a diluted share, from $65.7 million, or 72 cents, in the year-ago period as sales climbed 22 percent to $804.5 million from $658.7 million. Same-store sales fell 2 percent.

In a conference call to Wall Street analysts, Abercrombie & Fitch said chief executive officer Michael Jeffries will no longer be participating in earnings calls. "As our company continues to grow, the demands on Mike Jeffries, our ceo, become more and more increasing," said Michael Kramer, chief financial officer, on the call. "With the two growth initiatives and concept five and our international expansion, we believe Mike's time is better served focusing on those areas."

Abercrombie & Fitch expects earnings for the second half of the year in the range of $3.63 to $3.67 a diluted share, and full-year earnings between $5.15 to $5.20 a diluted share. At the bell, shares of Abercrombie & Fitch fell 2.2 percent, closing at $77.63.

Skate and surf retailer Zumiez saw a 90 percent surge in second-quarter earnings, buoyed by strong same-store sales. Reporting after the market closed, the company said earnings jumped to $3.1 million, or 11 cents a diluted share, from $1.6 million, or 6 cents a share as sales reached $82 million, up from $55.8 million in last year's period, a 47 percent increase. Total same-store sales rose 11.6 percent.Zumiez raised full-year guidance and expects earnings in the range of 97 cents to 99 cents a diluted share, which compares with previous guidance of 94 cent to 96 cents a diluted share. Shares of Zumiez reached a new 52-week high of $48.10, and closed up 7.9 percent to $47.89.

Earlier in the day, Tween Brands posted a 64 percent plunge in second-quarter earnings to $2.1 million, or 7 cents a diluted share, from $5.9 million, or 18 cents in the year-ago period. Sales for the quarter climbed 15 percent to $213.7 million from $185.8 million last year, while same-store sales decreased 2 percent.

The firm ended the day with the markets' greatest percentage decline as shares fell 28.5 percent to 27.59. Earlier, the stock marked a new 52-week low of $27.35. After market close, the stock marked a slight rebound, trading up 5.2 percent to $29.02.

"Our sales for the quarter failed to meet our expectations in large part because we underestimated the impact of so many schools in our markets moving their back-to-school start dates later, as well as Texas and Florida shifting their state tax holidays from July to August," said Mike Rayde, chairman and ceo, in a statement. "These shifts aggravated what had been a decline in retail traffic and lower store transactions throughout the quarter."

The company, which caters to girls ages 7 to 14, slashed its full-year outlook, and now expects to earn between $1.80 to $1.95 share, down from prior guidance of $2.10 to $2.25 a share.

Talbots Inc. widened its second-quarter loss to $13.3 million, or 25 cents a diluted share, from a loss of $3.9 million, or 7 cents, in last year's period. Results for the quarter include 10 cents per share in acquisition-related and financing costs.

Sales grew slightly to $572.3 million from $571.4 million, while same-store sales fell 4.8 percent. By division, Talbots fell 4.9 percent in same-store sales, while J.Jill declined 4.3 percent. The Talbots division was hurt by merchandise misses in their casual assortment, Arnold B. Zetcher, chairman, said in a release.

Talbots shares rose 1.9 percent closing at $22.40. The retailer posted results prior to the market close.Also earlier Wednesday were results from plus-size women's retailer Charming Shoppes Inc., which posted a 44 percent decline in second-quarter earnings to $18.3 million, or 14 cents a diluted share, from $32.6 million, or 24 cents, as sales rose 1 percent to $770.9 million from $763.4 million.

After the market closed, Hot Topic posted a loss of $1.7 million, or 4 cents a diluted share, which compares with a loss of $905,000, or 2 cents, last year. Sales increased slightly to $161.7 million from $160.3 million, while same-store sales declined 5.8 percent.

The company expects third-quarter earnings in the range of 13 cents to 16 cents a diluted share, and full-year profit around 29 cents to 33 cents a diluted share

Also after the market closed, Foot Locker Inc. posted an $18 million, or 12 cents per share, net loss for the second quarter ended Aug. 4, which compares with net income of $14 million, or 9 cents, in the prior year on sales that fell 1.5 percent to $1.28 billion from $1.3 billion. Same-store sales dropped 7.3 percent during the quarter.

"Our second-quarter results reflected lower-than-expected sales and the impact of a strategic decision to significantly accelerate the clearance of slow-selling merchandise inventory in our U.S. stores," said Matthew D. Serra, Foot Locker's chairman and ceo. "This inventory clearance strategy resulted in markdowns increasing in our U.S. stores by $50 million, at cost, or 20 [cents] per share, versus the second quarter of last year. As a result, we are now better positioned to offer more exciting and compelling products for the fall season."

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