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December’s Early Comps Down

NEW YORK — Christopher & Banks’ shares skyrocketed more than 11 percent Thursday as the company reaffirmed earnings expectations for the fourth quarter despite lower same-store sales in December.<br><br>The Minneapolis-based chain of 439...

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American Eagle was upgraded by Goldman, Sachs despite modest expectations for the fourth quarter.

WWD Staff

NEW YORK — Christopher & Banks’ shares skyrocketed more than 11 percent Thursday as the company reaffirmed earnings expectations for the fourth quarter despite lower same-store sales in December.

The Minneapolis-based chain of 439 stores under the Christopher & Banks and C.J. Banks labels said last month’s comparable-store sales slid 2 percent as total sales rose 20.1 percent to $47.8 million from $39.8 million in last year’s month.

Despite the retreat in comps, C&B stood by its fourth-quarter earnings estimate of 43 cents, helping its share price inflate $2.31, or 11.1 percent, to close at $23.06 on the New York Stock Exchange.

C&B’s run-up came as investors greeted the new year with a blizzard of buying activity, lifting the Dow Jones Industrial Average 265.89 points, or 3.2 percent, to 8,607.52, while Standard & Poor’s Retail Index rose 7.85 points, or 2.9 percent, to 275.21.

Other specialty retailers enjoying the first trading day of 2003 — the numerically sequential 01/02/03 — included: American Eagle Outfitters, up $1.39, or 10.1 percent, to $15.17; Aeropostale, up 65 cents, or 6.2 percent, to $11.22; Abercrombie & Fitch, up $1.20, or 5.9 percent, to $21.66; Bebe Stores, up $1.16, or 8.7 percent, to $14.56; Chico’s FAS, up $1.35, or 7.1 percent, to $20.26; Gap, up 55 cents, or 3.5 percent, to $16.07; Pacific Sunwear of California, up $1.04, or 5.9 percent, to $18.73, and Wilsons Leather, up 80 cents, or 16 percent, to $5.80.

Gains were registered by all 30 Dow component stocks, including Wal-Mart Stores, which rose $1.09, or 2.2 percent, to $51.60. Broadline retailers joining the market leader with meaty gains for the day included: Federated Department Stores, up $1.19, or 4.4 percent, to $29.95; J.C. Penney, up 49 cents, or 2.1 percent, to $23.50; Sears, Roebuck & Co., up 63 cents, or 2.6 percent, to $24.58, and Target, up $1.11, or 3.7 percent, to $31.11.

Inventory discipline and promotional restraint appear to have carried the month for C&B.

“December same-store sales were in line with our previously announced expectations,” Bill Prange, chairman and chief executive, said in a statement. “Merchandise margins held up reasonably well during December as we continued to conservatively manage inventories.

“By not engaging in special sales or promotions during the month, we were able to preserve the integrity of our brands.”

Also reporting, Suffern, N.Y.-based Dress Barn Inc. said that December comps fell 6 percent, while total sales rang up $79.7 million, a 3.5 percent decrease over December 2001 sales. The company said the fiscal month of December included Thanksgiving week, while December 2001 did not.

Combined same-store sales for fiscal November and December decreased 5 percent from a year earlier.

Even with the discouraging report, Dress Barn’s shares gained 6 cents, or 0.5 percent, and closed at $13.36 in Nasdaq trading.

The majority of the nation’s retailers are expected to report December sales Thursday.

Specialty stores faced a competitive pricing environment as December progressed, putting retailers’ monthly comps in jeopardy. For example, Thomas Filandro, specialty retail analyst at Goldman Sachs, cited the highly challenging retail landscape as he lowered American Eagle Outfitters’ December comp outlook to a decline of 4 to 6 percent, from a decline of 1 to 3 percent, at AE brand stores.

In addition, he lowered fourth-quarter earnings estimates for the youth retailer by 6 cents to 50 cents, versus 60 cents last year. AE in particular, he noted, is vulnerable to Gap’s more aggressive stance on broad-based promotion and primary competitor Abercrombie & Fitch’s rapid rollout of its Hollister concept.

However, Filandro upgraded AE’s stock to “outperform” from “in-line” based on a brighter spring 2003 outlook due to cost initiatives and easier comp comparisons. In addition, he said, the first spring floorset, slated to arrive Feb. 1, may represent an inflection point for comp growth.

“The spring transition line, which was set on Christmas Eve, has yielded some encouraging results thus far, in particular in the classification of knit tops and, more specifically, graphic T-shirts,” he noted. “Although not out of the woods yet, it appears that AE brand positioning is more on target to its core mating phase consumer.”

Jeffrey Edelman, analyst at UBS Warburg, wrote in a research note that he believed most retailers finished the five weeks of fiscal December within 1 to 2 percent of plan and could end the quarter in a similar manner. In addition, he noted they are likely to experience some gross margin improvement because of conservative planning and easy comparisons.

“This would suggest most apparel companies could achieve targeted profits for the quarter,” Edelman said.

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