NEW YORK — Pressured by falling sales at its flagship division and an accounting change, ShopKo Stores Inc. came up with first-quarter losses of $1.1 million, or 4 cents a diluted share.
This story first appeared in the May 23, 2003 issue of WWD. Subscribe Today.
Both periods also were affected by the adoption of new accounting rules for money accepted from suppliers, the effect of which pulled down the bottom line in the most recent quarter by $900,000 after tax, or 3 cents a share.
In the 2002 quarter, the deficit hit $185.6 million, or $6.35 a share, as an accounting change severely depressed the results. Without the change, ShopKo managed profits of $500,000, or 2 cents a share, a year ago.
Revenues for the three months ended May 3 dipped 2.9 percent to $711 million from $731.9 million a year ago. Comparable-store sales slipped 2.7 percent.
At the 141-door ShopKo division, operating income sank 36.9 percent to $15.8 million. Sales fell 4 percent to $530.5 million, while comp sales also were down 4 percent.
Operating losses at the 222-store Pamida chain narrowed to $5.3 million from $8.5 million a year ago. Sales inched up 0.6 percent to $177.4 million. Comps rose 1.3 percent.
“While sales were disappointing at the ShopKo division, we continue to be encouraged by the improvement in sales trends at the Pamida division,” said president and chief executive Sam Duncan, in a statement. “Although the retailing environment was difficult, inventories and expenses continue to be well-controlled in both divisions.”
Overall merchandise inventories stood 5.8 percent below year-ago levels at the end of the quarter. Selling, general and administrative expenses increased 100 basis points to $155.6 million.
For the second quarter, the Green Bay, Wisc.-based retailer is looking for earnings of 25 to 30 cents a share, while comps are slated to fall in the low-single-digit range. For the year, ShopKo said profits would be at the low end of its previously estimated range of $1.40 to $1.50 a share.
Other broadline retailers reporting on Thursday included:
Weak sales and rising expenses pushed Stein Mart Inc.’s first-quarter net income down 86.7 percent, although women’s apparel was an area of relative strength.
Net income regressed to $1.5 million, or 4 cents a share, from $11.4 million, or 27 cents, a year ago.
Sales for the three months ended May 3 fell 7.1 percent to $330.6 million from $356 million a year ago. Comparable-store sales fell 9.3 percent.
“Our results were adversely impacted by the lack of expense leverage on negative comparable-store sales and the additional markdowns necessary to manage our inventory,” said president and chief executive Michael Fisher in a statement. “With sales continuing substantially below plan, inventory management has taken on even greater importance and our aggressive efforts have controlled inventories to appropriate levels and freshness.”
At the end of the quarter, inventories were 4.5 percent below year-ago levels. Selling, general and administrative expenses shot up 280 basis points, as a percent of sales, to $84.5 million.
Gwen Manto, chief merchandising officer, on a conference call, noted, “Even with the disappointing results we made some progress in the recovery of our ladies’ apparel business.”
Though comps for the quarter were down across all merchandise categories, women’s apparel outperformed the company average.
Women’s sweaters, jackets and basic pants performed well and, while the comp trend in the dress area was “significantly down” on reduced assortments and a difficult Easter season, Manto noted casual sundresses were emerging as a new business. The newly added category of women’s activewear has also been “very strong,” she said.
Stein Mart’s boutique business improved against company trends over the course of the quarter. “Boutique sportswear had a slight comp increase in April, with good results in knitwear, casual collections and novelty bottoms,” said Manto.
Cost controls allowed The Elder-Beerman Stores Corp. to reduce its net loss in the first quarter even as sales continued to slide.
For the three months ended May 3, the Dayton, Ohio-based department store chain posted a net loss of $2.5 million, or 22 cents a diluted share. That compares with last year’s greater loss of $18.6 million, or $1.64. Excluding a change in accounting principle, the year-ago loss would have been a more modest $3.5 million, or 31 cents.
Total revenues for the period dropped 7 percent to $138.6 million from $149 million a year ago, as same-store sales decreased 7.7 percent. Elder-Beerman said the sales decline was due to poor weather, the war in Iraq and the sluggish economy.
As reported, EB Acquisition Ltd. has written to the management of Elder-Beerman Stores Corp. decrying the department store’s decision to negotiate exclusively with a single suitor and urging a “full and fair” auction of the company. The investor group said it is interested in making an all-cash offer for the company, even at a premium to the current stock price. Elder-Beerman earlier reported it has signed an exclusive letter of intent agreement for a possible sale of the firm. The retailer did not name the suitor and said that it had recently received expressions of interest from several parties, but cautioned there “can be no assurance that these discussions will result in any transaction.”
On a conference call, ceo Bud Bergren said the company could not respond to any questions regarding the possible sale and asked that participants respect that request, which they did. He added: “You can be certain that our board will act in a manner that will maximize shareholder value.”
A 70-basis-point decline in total costs, which includes cost of goods, occupancy and buying costs, selling, general and administrative expenses, and other costs, allowed the company to pare its net loss.
Hurt by the anemic retail environment, Stage Stores Inc. registered downturns in first-quarter income, sales and comparable-store results.
For the three months ended May 3, income swooned 24.6 percent to $13.4 million, or 69 cents a diluted share, from $17.8 million, or 82 cents, in the year-ago quarter. Sales fell 4.2 percent to $198 million from $206.7 million, while same-store sales dropped by 7.5 percent.
Jim Scarborough, chairman, president and chief executive officer, said in a statement, “While our merchandise margins were negatively impacted by our heightened promotional activities, we ended the quarter with inventories per selling square foot at approximately 7.1 percent below the level at the end of last year’s first quarter.”
The ceo said lower inventory shrink expense, higher income from its credit card program and lower incentive compensation expense all helped to partially offset the impact of lower sales and lower merchandise margins.
The company said at the close of trading Wednesday that it sold its private label credit card business to Alliance Data Systems Corp., which will now operate the card program.