Not even a month gone, and 2011 is already proving problematic.

This story first appeared in the January 24, 2011 issue of WWD. Subscribe Today.

A string of fashion firms have revised fourth-quarter guidance in the last two weeks — with many warning along the way that the consumer mood might not remain quite as buoyant as they hoped it would after the sales boom early in the holiday shopping season. Now that New Year’s hangovers are long gone, consumers may once again be slamming their wallets shut in the face of continuing high unemployment, ongoing mortgage foreclosures and spiraling prices — on everything from food to clothes to gasoline. The result is an inventory overhang for both retailers and vendors.

The most recent was The Jones Group Inc., which late last week said fourth-quarter earnings are expected to land at 2 cents a diluted share, below the 11 cents analysts had expected and the same figure for the 2009 quarter. Shares of Jones fell $1.34, or 9.7 percent, to $12.44 Friday. On their way to the close, shares hit a new 52-week low of $12.11.

Through holiday, figures held up well for men’s wear firms and luxury concerns, but Jones joins a growing list of companies focused on the middle market stung by fourth-quarter shortfalls in sales, earnings or both. Also on Thursday, J. Crew Group Inc., preparing to be acquired by TPG Capital and Leonard Green & Partners, held to its earlier fourth-quarter earnings projections but said comparable-store sales for the period would decline in the midsingle digits rather than the low-single-digit decline forecast earlier. The Talbots Inc. on Jan. 10 told Wall Street its loss for the period would be larger than expected, and Liz Claiborne Inc. brought down estimates on Jan. 6, as it reported lower December comps at Juicy Couture and Lucky Brand stores.

Inventory discipline has been among the saving graces of retail in the difficult period since the economic meltdown of September 2008. If sales failed to keep pace with inventories in the final months of 2010, though, that isn’t indicated in figures reported by the Commerce Department. The adjusted inventory-to-sales ratio among retailers for November was 1.34, a tick below the 1.35 reported for October. December figures haven’t yet been released.

After a strong kickoff to the holiday season in November, same-store sales landed south of analysts’ expectations in December, and retail stocks, which grew 23.5 percent last year, have been in retreat since. Last week, the S&P Retail Index declined 1 percent to 502.18 following a 0.5 percent decline on Friday. The decline since Jan. 1 is 1.1 percent. The Dow Jones Industrial Average was up 0.7 percent to 11,871.84 last week and is ahead 2.5 percent so far this year.

Of the 171 issues tracked by WWD, 42 had increases last week versus 127 with declines and two that were unchanged.

Figuring prominently among the challenges for 2011 is the virtual certainty of price increases at the wholesale and retail levels. At the Cowen and Co. Consumer Conference in New York earlier this month, Emanuel Chirico, chairman and chief executive officer of Phillips-Van Heusen Corp., said that during the second half of this year, “we’re seeing increases that are approaching 15 percent….Clearly, we will pass on a substantial portion of that.

“The question is: How will the U.S. consumer deal with that?” he said.

Wesley Card, Jones’ ceo, also pointed to price increases as a concern. “The strength in consumer spending and acceptance of price increases in 2011 remain uncertain,” he said in preparing investors for the earnings shortfall when the company reports quarterly results on Feb. 9. “In addition, continued cost inflation will present a significant challenge to margins.”

Card said sales in 2010 are expected to rise 9.3 percent to $3.64 billion, while the firm’s brands “are positioned to achieve net revenue growth in midsingle digits” in the new year. But sounding a less than optimistic note, he said gross margins “can be at 2010 levels.”

John McClain, chief financial officer, said the firm late last year “needed to sell more into the off-price channel” to clear second-half inventories that grew on the basis of first-half sales strength. “We are now well positioned with our inventory, and we have tightened our 2011 buy plans to a more conservative approach,” he said.

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