Most specialty stores reporting quarterly results Thursday managed to meet or beat the cautious expectations they helped to create.
This story first appeared in the November 20, 2009 issue of WWD. Subscribe Today.
With consumer spending and mall traffic still spotty and the fate of the holiday season unclear, retailers have been conservative in their guidance and remained fairly noncommittal about the fourth quarter. Clouding the picture was the inconsistent performance of comparable-store sales, which went into a tailspin in the middle of last year’s third quarter as the credit crisis worsened.
The Buckle Inc., one of the teen retailers expected to perform best during the downturn, was aided by healthy gains in online sales as it posted a 14.5 percent increase in third-quarter profits, just ahead of estimates.
The Kearney, Neb.-based retailer said for the period ended Oct. 31, net income rose to $33.3 million, or 71 cents a diluted share, from $29.1 million, or 62 cents, in the year-ago quarter. Revenue grew 9.8 percent to $231.2 million, buoyed by a 41.9 percent jump in direct sales to $12.5 million. Net sales for 2008’s third quarter totaled $210.6 million. Analysts projected earnings per share of 70 cents on sales of $231.1 million.
Same-store sales for the quarter were up 4.3 percent. The men’s business experienced some softness, as sales declined about 1.5 percent, but women’s sales increased 17.5 percent.
“I think our team over the last two-plus years really capitalized on the strong [men’s] knit category, and did very well, and now there’s a little less newness out there,” said president and chief executive officer Dennis Nelson on the earnings call. He assured analysts and investors Buckle was tightly managing this side of the business and inventories were in line.
For the nine months, the retailer posted a 21.5 percent jump in net income to $85.2 million, or $1.83 a diluted share, up from $70.1 million, or $1.50. Revenue increased 15.4 percent to $623.8 million from $540.6 million.
Dress Barn Inc., concluding the first quarter of its fiscal year, saw profits for the period expand as sales grew and markdowns eased.
The Suffern, N.Y.-based specialty retailer added that the previously announced merger with Tween Brands Inc. is on track to close on Nov. 25.
In the three months ended Oct. 24, the company recorded a 9.9 percent improvement in net income to $21.7 million, or 33 cents a diluted share, on par with analysts’ consensus estimates. A year ago, the company’s earnings totaled $19.7 million, or 30 cents a share.
Revenues in the quarter improved 7.4 percent to $404.1 million from $376.4 million in the comparable period.
The firm’s namesake stores registered a 6 percent gain in net sales to $248 million, while net sales at the Maurices division grew 9 percent to $156.1 million. Consolidated same-store sales were up 4 percent in the quarter.
“Improvements in our merchandise mix and tight inventory controls have helped drive the growth of our Dress Barn and Maurices sales and profitability,” said David Jaffe, president and ceo.
With one better-than-expected quarter in hand, the company raised its fiscal 2010 outlook and said it now estimates EPS to range between $1.20 and $1.30 on the year. The firm had previously issued EPS guidance of between $1.10 and $1.20. Before the release, analysts had expected 2010 EPS to total $1.20 on average. The firm said it would update guidance after it closed on the Tween Brands deal.
Although The Wet Seal Inc. saw its third-quarter net income fall 33.5 percent, it managed to match analysts’ estimates.
However, the Foothill Ranch, Calif.-based company introduced fourth-quarter guidance that was slightly below expectations and said it had recently seen a slump in comparable-store sales.
Ceo Ed Thomas said the company experienced a “notable decline” in comp trends during the first half of November. “We believe, at minimum, that the consumer is taking a pause after Halloween and before the start of the holiday shopping season,” he said.
In the quarter ended Oct. 31, Wet Seal registered net income of $4.5 million, or 4 cents a diluted share, versus a profit of $6.8 million, or 7 cents, in the year-ago period. Sales dipped 3.5 percent to $141.5 million, from $146.6 million.
Comps decreased 6.2 percent for the quarter, with Wet Seal down 7.6 percent but Arden B. up 1.3 percent.
The retailer projected fourth-quarter EPS of between 3 cents and 7 cents, slightly less than the 8 cents predicted by analysts. The company said next year it will accelerate the growth of the 420-unit Wet Seal division, potentially to between 700 and 750.
Wet Seal said net income for the nine months slumped 51.1 percent, to $12.6 million, or 12 cents, from $25.9 million, or 26 cents. Revenue slid 6.4 percent to $409.9 million from $438.1 million.
The company said it appointed Sharon Hughes, an Arden B. merchandising consultant, as president and chief merchandising officer of the division. It’s also seeking a new president and chief merchandising officer of the Wet Seal division to succeed Maria Comfort, who resigned.
Despite missing analysts’ third-quarter estimates with a reduced third-quarter loss, shares of New York & Company Inc. rose 70 cents, or 18.7 percent, to $4.45 after the company said it expected to achieve profitability in the fourth quarter.
In the third quarter ended Oct. 31, its net loss shrank to $6.3 million, or 11 cents a diluted share, from a loss of $7.9 million, or 13 cents, in the year-ago quarter. Sales were down 8.5 percent to $227.9 million, from $249 million, as comps fell 8.4 percent.
“While we continue to plan for a very challenging environment, we believe our initiatives will enable us to achieve market share gains, achieve profitability in the fourth quarter and approach break-even levels for the second half of the [current] year,” chairman and ceo Richard Crystal said on the conference call.
But Brean Murray, Carret & Co. retail analyst Eric Beder said the company’s “weaker-than-expected bottom-line results” were “a source of frustration.”
Beder, who has a “hold” rating on the stock, said that while the retailer’s turnaround has moved slowly, a “return to profitability after five quarters of losses has the potential to be a key catalyst.”
For the nine months, the net loss was $16 million, or 27 cents a share, versus a profit of $7.6 million, or 12 cents, in the 2008 period. Revenue slid 13 percent to $708.6 million.