Shares of Casual Male Retail Group Inc. fell more than 10 percent in morning trading today after the Canton, Mass.-based men’s big & tall retailer reported an unexpected third-quarter loss brought on by a downtick in traffic.
David Levin, president and chief executive officer, told investors on a morning conference call that traffic “started to downtrend slightly in August, but the month of October was when we felt it the most.” Traffic was about 6 percent below levels during the third quarter of 2010, the company said, primarily due to unfavorable weather conditions. Comparable-store sales fell 1.7 percent in October.
For the three months ended Oct. 29, Casual Male logged a net loss of $1.6 million, or 3 cents a diluted share, against net income of $289,000, or 1 cent, during the 2010 quarter. Sales dropped 0.6 percent to $89.4 million from $89.9 million as comparable revenues rose 0.7 percent, with a 1.5 percent increase in same-store sales offset by a 2.5 percent decline in direct sales.
On average, analysts had expected the firm to post a profit of 2 cents a share on revenues of $94.1 million.
Shares dropped 39 cents, or 10.4 percent, to $3.36 in the first 90 minutes of trading today.
Gross margin fell to 45 percent of sales from 45.7 percent in the third quarter of 2010 as merchandise margins declined and occupancy costs relative to sales increased.
Levin said that while Casual Male is hopeful traffic will improve from now through the end of the year, the company has reworked its sales forecast for the fourth quarter “as a cautionary procedure.” Comps are now expected to be up in the low-single digits, he said. Inventories have been adjusted based on this forecast, he added, and “we don’t anticipate any jeopardy to our gross margins going into next year.”
The company also lowered its full-year earnings guidance to reflect the third-quarter loss and now expects profits for 2011 to land at between 35 and 38 cents a share versus its previous forecast of 40 to 45 cents. That implies fourth-quarter earnings of 21 to 26 cents a share based on nine-month results.
Levin said the company remained pleased with the performance of its Destination XL superstores, which will number 16 by the end of the year. “We continue to be impressed with results we’re seeing with the new concept and we continue to accelerate the projected store openings for 2012,” he said. “We’ve been diligently working on site selections for next year and we now anticipate opening 35 to 40 new stores next year in contrast to the 25 to 30 that was discussed on the last quarterly call.”
Going forward, Levin said the stores will generally be smaller, averaging 9,000 to 10,000 square feet, rather than 12,000. A couple of test locations of 6,000 square feet in smaller retail markets have performed well, he added.
The company currently operates 430 Casual Male XL units, 12 Destination XL stores and 14 Rochester Clothing stores in addition to its catalogues and e-commerce sites.
For the nine months, net income was down 8.7 percent to $9.2 million, or 19 cents a diluted share, from $10 million, or 21 cents, in the comparable prior-year period. Sales grew 1.4 percent to $286.2 million from $282.2 million.