Tween Brands Inc. and Zale Corp. disappointed Wall Street with substantial losses on Wednesday and outlined plans to reduce costs through job cuts and other means in light of continuing soft demand.
Touching off a wave of selling, Tween reported a loss of $13.9 million, or 56 cents a diluted share, during the fourth quarter ended Jan. 31 compared with earnings of $25 million, or $1 a share, in the year-ago period. Excluding a restructuring charge of 19 cents a share, the retailer had a net loss of $9.1 million, or 37 cents a share.
However, analysts on average expected a net profit of 44 cents a diluted share, and shares of the New Albany, Ohio-based specialty store group nose-dived, closing at $1.67, down $1.07 or 39.1 percent, and were as low as $1.40 during the trading day. After disclosure on Aug. 13 of the company’s plans to convert all stores under the Limited Too banner to its newer Justice nameplate, shares dropped 46.2 percent to $8.01 from $14.88.
With a 23 percent decline in same-store sales, revenues fell 15.9 percent to $265.9 million from $316.1 million.
Chairman and chief executive officer Michael Rayden said Tween, which cut 150 positions last year, would trim another 85 jobs, 36 of which were already vacant, to save about $7 million before taxes in 2009. Tween also amended its revolving credit facility, reducing it to a maximum of $50 million from $100 million, and cut capital expenditures for the new year to about $10 million from $63.8 million in 2008.
Tween’s earnings and stock performance notwithstanding, the rebranding may yet pay dividends, analysts said. “If Tween stayed with Limited Too, they would have continued to lose share,” said Susquehanna Financial Group retail analyst Thomas Filandro, who added that the company lost “substantial” market share in the fourth quarter to Wal-Mart Stores Inc.
“I sincerely believe that the [Tween] brand still has a clear meaning in the marketplace,” he said.
Rayden said the company became “highly promotional” as economic conditions worsened throughout the year, cutting into margins, but managed to reduce inventories 24.4 percent in 2008, to $88.5 million.
For the year, the retailer posted a net loss of $17.1 million, or 69 cents a diluted share, compared with earnings of $52.6 million, or $1.81 a share, a year earlier. Net sales slid 1.9 percent to $995.1 million from $1.01 billion.
At Dallas-based Zale, special charges and a double-digit sales decline were the major culprits in a larger-than-expected second-quarter loss.
Zale, which a year ago announced $175 million in inventory and cost reductions, said Wednesday that it identified another $140 million in cost cuts, including the closure of 115 underperforming stores as their leases mature and the elimination this month of 245 associate positions, 75 of which were unfilled. It is also seeking further inventory reductions and has trimmed its supplier count by two-thirds since the beginning of 2008.
The company operates more than 2,080 jewelry stores in the U.S., Canada and Puerto Rico.
For the three months ended Jan. 31, the loss was $23.6 million, or 74 cents a diluted share, versus net income of $60.8 million, or $1.34, in the year-ago quarter. Excluding a series of charges for store and goodwill impairments and other items in both periods, earnings fell to $5.1 million, or 16 cents a share, 32 cents below analysts’ estimates, from $52.7 million, or $1.16, in last year’s quarter. Revenues retreated 17.9 percent to $679.4 million from $827.8 million, and were down 18.1 percent on a same-store basis.
“The second quarter was the most difficult in memory due to the overall macroeconomic situation,” Neil Goldberg, chief executive officer, told Wall Street analysts on a conference call.
Some of the deterioration was the result of an “aggressive promotional stance” in which the retailer began emphasizing storewide discounts as the retail environment worsened, Goldberg said. After the holiday season, the chain returned to its original strategy that emphasized emotion-based purchases and item-specific promotions.
“The result has been more normalized 50 percent-plus margins, along with comparable-store sales improvement to trend,” Goldberg said. “These comp and margin improvements have held from January through the Valentine’s Day selling period.”
For the six months, the loss was $68.9 million, or $2.17 a diluted share, against income of $32.5 million, or 69 cents, in the year-ago period. Revenues dropped 13.4 percent to $1.04 billion from $1.21 billion.
Shares of the company fell 11 cents, or 7.5 percent, to close at $1.35 on Wednesday. Retail shares managed to hold on to most of Tuesday’s gains as the S&P Retail Index was down 1.93, or 0.8 percent, to 250.35. The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite all gave up 1.1 percent during trading on Wednesday.
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews
“Stranger Things” is getting a new cast member for season 2. Meet @sadiesink_, the 15-year-old who will be joining the Netflix series for its new season. You may recognize her from “The Glass Castle” with Brie Larson and Woody Harrelson, but the Texas native’s next role goes in an entirely different direction. She describes her character, Max, as “a rough and tumble skater girl [who] becomes friends with the boys at school.” The second season debuts on October 27. (📷: @jgreenery) #wwdeye
Amid the Harvey Weinstein controversy, there’s another sector that’s being put under the spotlight for sexual abuse: the modeling industry. While rumors about abuse and sexual harassment of female and male models — and the photographers, agents and others who perpetrated it — have circulated within the fashion world for years, model @cameronrussell started posting stories from models on Instagram last week about abusive situations they’ve encountered — from sexual harassment and molestation to attempted rape. Over 75 have weighed in so far. Read more on WWD.com. Link in bio. #wwdnews
To celebrate its 16th anniversary, @dylanscandybar tapped designers and celebrities to create mosaics out of candy. The mosaics will be auctioned off to support the philanthropic cause of each participant’s choice. Pictured here is the mural created by @aliceandolivia's Stacey Bendet. For a first look at some of the other artwork being unveiled tonight, go to WWD.com. #wwdeye
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