Retailers catering to Baby Boomer women couldn’t escape the crushing pressure of the economic downturn. Chico’s FAS Inc., The Talbots Inc. and Charming Shoppes Inc. all reported declines in third-quarter profitability.
Chico’s posted a large drop in profits, and Talbots and Charming Shoppes posted wider losses for the period. However, with Talbots reporting that it would convert $125 million in working capital lines of credit to committed facilities upon completion of due diligence, its shares soared 25.5 percent to $2.66.
Charming Shoppes’ shares picked up nearly as much, rising 21.7 percent to $1.46 on an upbeat fourth-quarter outlook and news that it would discontinue its Lane Bryant Woman catalogue and cut costs an additional $100 million to $125 million. Chico’s shares rose a more modest 2.1 percent to $2.40.
“For those selling to women over 40, it’s really been challenging for over a year now,” said Sterne, Agee & Leach retail analyst Margaret Whitfield. “The family budget is under a lot of strain and women are sacrificing.” They’re also not seeing much in the way of new, compelling merchandise, she said.
Chico’s still has a lot of bright, glitzy apparel that does not suit its target customer, Whitfield said, while White House|Black Market has been able to extend its customer base to women in their 30s. Company comparable-store sales dropped 13.4 percent — 17 percent at Chico’s, but 5 percent at White House.
For the quarter ended Nov. 1, Chico’s net income fell 91.5 percent to $2 million, or 1 cent a diluted share, from $23.6 million, or 13 cents a share. Net sales declined 5.2 percent to $394.2 million from $415.9 million. Analysts predicted a loss of 2 cents a share on sales of $390.9 million.
Inventory per square foot dropped 2 percent overall and 9 percent at the Chico’s division, and are slated to recede in the low-single digits and 9 to 10 percent at White House during the current quarter. “Given current business trends, this may lead to higher markdowns and lower gross margins, particularly for the Chico’s brand,” Whitfield said.
Talbots widened its net loss to $167.2 million, or $3.13 a diluted share, versus a loss of $9.4 million, or 18 cents a share, a year earlier. Excluding various charges related to the decision to sell J. Jill and its earlier closures of its Kids, Mens and U.K. businesses, the loss grew to $14.8 million, or 28 cents, from $893,000, or 2 cents. Stripping out other charges, the loss came to 21 cents a share, just below analysts’ consensus estimates of 22 cents. Quarterly sales fell 13.7 percent to $357.3 million from $414 million last year as comps slid 13.9 percent and inventory dropped 23 percent.
Retail analyst Jennifer Black of Jennifer Black & Associates said word of Talbots’ new financing should “quiet people” concerned about the retailer’s liquidity, while its new assortments should build confidence in its merchandising strength. “The changes they have made have resonated extremely well,” she said.
Talbots did not offer fourth-quarter or full-year guidance due to continued economic volatility. Analysts are looking for a loss of 22 cents a share on sales of $382.4 million for the fourth quarter, and a loss of 69 cents on revenues of $1.77 billion for the year.
Charming Shoppes’ quarterly loss grew to $93 million, or 81 cents a share, from $3.6 million, or 3 cents a share, in 2007. Losses from continuing operations, exclusive of special items, were $23.7 million, or 21 cents a diluted share. Quarterly comps fell 9 percent, while net sales dropped 7.8 percent to $553.1 million from $599.7 million.
The performance exceeded analysts’ expectations of a loss of 36 cents a share, exclusive of charges, on revenues of $536.8 million.
Improvements in October sales and margin performance allowed Charming Shoppes to beat its internal projections for the quarter, said chairman and interim chief executive officer Alan Rosskamm. It will continue to “liquidate inventory, reduce capital spending and realize cost savings,” he said, adding that the retailer ended the quarter with no borrowings under its revolving credit facility.
In addition to its cost cuts and the discontinuation of the Lane Bryant Woman catalogue, the company intends to close an additional 100 stores. It operates 2,344 units.
The challenge of selling jewelry to the masses in a weakening economy came into sharp focus Tuesday as both Signet Jewelers Ltd. and Zale Corp. reported sharp declines resulting in quarterly losses.
Signet, the Hamilton, Bermuda-based operator of Kay, Jared and other chains in the U.S. and U.K., posted a net loss of $15.1 million, or 18 cents a diluted share, versus net income of $2.5 million, or 3 cents, in the year-ago quarter. In the third quarter ended Nov. 1, sales fell 7.3 percent to $629.3 million from $678.7 million and were off 4.3 percent at constant exchange rates. Same-store sales were off 6.6 percent.
The company said capital expenditures for the year should fall to about $125 million from $140.4 million last year and, pending final determination, should be cut to about $65 million next year.
“We have a strong business that we continue to manage cautiously in the current, very difficult trading conditions,” said Terry Burman, ceo. “We are focused on maximizing gross margin dollars, managing costs and inventory tightly, as well as maintaining a strong balance sheet.”
In the most recent quarter, gross margin fell 10.5 percent to $174.8 million, or 27.8 percent of sales, from $195.2 million, or 28.8 percent.
Dallas-based Zale reported that its net loss in the first quarter expanded to $45.3 million, or $1.43 a diluted share, from $28.4 million, or 58 cents, in the year-ago period. Analysts on average had expected a significantly lower quarterly loss of 95 cents. Excluding discontinued operations, the year-ago loss was 54 cents. Sales backtracked 3.5 percent to $364.1 million from $377.3 million and fell 3.7 percent on a same-store basis.
Citing a “significant decline in sales” in October and November, the company withdrew earlier guidance.
“We have recently eliminated almost $15 million of additional capital expenditures from our fiscal 2009 plan, and we intend to find more avenues for reducing both capital and expenses in the coming year,” said ceo Neal Goldberg. “Our work to consolidate and speed up our supply chain should enable us to run with significantly lower inventory, driving greatly improved returns.”
He added that Zale’s “position as the value provider in the industry will serve us well in these economic conditions.”
However, the disappointing results and withdrawal of guidance drove investors from Zale’s stock, which finished the day down 40.9 percent to $5.38. Signet shares fell 6.4 percent to $8.49.
High-end jeweler Tiffany & Co. is scheduled to report its third-quarter results today.
The annual Veuve Clicquot Polo Classic in Pacific Palisades this weekend drew Kate Hudson, Tracee Ellis Ross, Laura Dern and more. See pictures of the star-studded event on WWD.com. (📷: @chelsealaurenla) #wwdeye
In his new book “Hollywood Royale,” Andy Warhol’s Protégé Matthew Rolston celebrates the Eighties revival of Hollywood glamour. Featuring more than 100 portraits taken by Rolston from 1977 to 1993, the book contains photos of icons like Michael Jackson, Cyndi Lauper, and @drewbarrymore, pictured here in 1991. “Hollywood Royale,” out today, will be accompanied by an exhibition opening at Los Angeles’ Fahey/Klein Gallery on March 1. #wwdeye
"Nowadays when life is not so happy with everything going on in the world, I think people come to me for a little bit of whimsy and color and fun." - Designer Rebecca De Ravenel on her cult-favorite jewelry line. (📸 : @vsteves) #wwd40
“Everyone is talking about how the retail industry is struggling, but I think it’s an incredible time because brands who are doing something different and innovative are setting themselves up for the future,” said @adamgoldston, who founded the luxury athletic brand @apl with his brother @ryangoldsten. The Goldston’s are part of WWD’s 40 under 40: a group of industry notables. See the rest of the list on WWD.com. (📷: @vsteves) #wwd40
@eyeswoon blogger Athena Calderone debuted her first-ever cookbook, “Cook Beautiful,” which is heavily centered on the presentation and visual expression of food. Pictured here are her miso glazed carrots from the book. Get the recipe on WWD.com. (📷: @johnny_miller_) #wwdeye
“It’s passion that helps get anybody to a certain point and it’s what’s propelled me,” said Kith founder @ronniefieg, one of WWD’s 40 under 40: a group of industry notables who are changing the face of retail, fashion and beauty. Fieg, who opened a Manhattan flagship on October 7, began his career at age 13 as a stock boy and salesman for footwear chain David Z. “I think staying true to [my] beliefs, hard work and passion have gotten me to where [Kith] is today.” See the rest of the 40 at WWD.com. (📷: @vsteves) #wwd40
25-year-old @samweaving is about to break out this fall, starring in Netflix’s horror film “The Babysitter,” fittingly out today on Friday the 13th. That’s not the only place you’ll be seeing her, though — Weaving’s got a role Showtime’s “SMILF” and another alongside Frances McDormand and Woody Harrelson in “Three Billboards Outside Ebbing, Missouri.” Though she’s got a full plate at the moment, there’s one role she’s got her eye on: Marilyn Monroe. “I’m a little too young at the moment, but it’s on my bucket list,” the actress told WWD (📷: @dandoperalski) #wwdeye
BFF's Poppy Jamie and Suki Waterhouse celebrated the launch of their bag line Pop x Suki at Nordstrom last night. "The line is really about our friendship, and how we are so different but complement each other," said Waterhouse. 👯 (📷: Katie Jones) #wwdeye
After designing the new @louisvuitton and @bulgariofficial flagships and a @chanelofficial boutique opening in Japan, @petermarinoarchitect has another project on his plate: The Lobster Club. Located in the Seagram Building, it’s the famed architect’s first restaurant project in New York, serving up modern Japanese brasserie-style cuisine. Bronze hues, bespoke material detailing, blush and chartreuse tones and a heavy emphasis on Picasso can be seen throughout. Mark your calendars for Nov. 1 for the much-anticipated opening. (📷: @clint_spaulding) #wwdeye