Specialty retailers Chico’s FAS Inc. and Limited Brands Inc. increased second-quarter profits, but a sales slump at Hot Topic Inc. doubled its loss.
This story first appeared in the August 19, 2010 issue of WWD. Subscribe Today.
Improved fashion and an increase in merchandise from outlet stores helped to lift Chico’s, and the company’s stock gained 10 percent on Wednesday to close at $9.25. For the period ended July 31, income for the Fort Myers, Fla.-based women’s retailer more than doubled to $30.5 million, or 17 cents a diluted share, versus income of $14.9 million, or 8 cents, a year earlier.
Net sales expanded 10.8 percent to $465.4 million, from $419.9 million. By division, volume at the Chico’s and Soma Intimates brands collectively increased 8.5 percent to $319.7 million, and sales at White House|Black Market climbed 16.3 percent to $145.7 million. Comparable-store sales for the quarter improved 6.4 percent, driven by an 11.2 percent increase at White House|Black Market. Comps at Chico’s and Soma rose 4.3 percent, respectively.
Despite the strong quarter, president and chief executive officer David Dyer said on a conference call with Wall Street analysts that the company “should have earned a few pennies more and had a few percentage points higher in comp-store sales.”
As summer heat waves plagued much of the country, Dyer said Chico’s was “underinvested in wear-now clothing, especially in July.”
At White House|Black Market, the company faced “another type of problem,” he said. “We ran out of inventory. We didn’t have sufficient sale and clearance inventory to drive July sales.…Our July sales and inventory issues obviously followed us into the first few weeks of August, but we believe we will be back on track when our fall books and marketing campaigns launch at the end of the month.”
At Limited, the company said income for the period ended July 31 more than doubled to $178.7 million, or 54 cents a diluted share, from $74.3 million, or 23 cents, in the year-ago period.
Adjusted income was $120.6 million, or 36 cents a diluted share, compared with $60.3 million, or 19 cents, in the same period last year. Adjusted income excluded pretax gains related to the sale of a portion of Limited’s shares of Express in its initial public offering. It also excluded the sale of its remaining interest in Limited Stores and a pretax loss due to the early retirement of portions of the firm’s 2012 and 2014 maturity bonds in the current quarter, as well as a pretax gain and related tax benefit for the divestiture of a noncore joint venture in the year-ago period.
Sales rose 8.5 percent to $2.24 billion from $2.07 billion.
In contrast, Hot Topic said its second-quarter loss doubled as sales fell at the company’s namesake chain and plus-size brand Torrid.
For the period ended July 31, the mall-based retailer posted a loss of $6.3 million, or 14 cents a diluted share, versus a loss of $3.2 million, or 7 cents a share, in the year-ago quarter.
Weak sales in shoes, intimate apparel and women’s fashion contributed to a 4.9 percent dip in net sales to $150 million from $157.8 million, the company said. Comparable-store sales declined 6.4 percent, with a 6.5 percent drop at Hot Topic and a 6 percent fall at Torrid.
Ceo Betsy McLaughlin told Wall Street analysts during a conference call that Hot Topic will “increase promotional activity” in the third quarter, adding that comparable-store sales to date are down 5 percent.