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EARLY EASTER AIDS MARCH COMPS

Byline: Jennifer Weitzman

NEW YORK — Benefiting from a shift in the Easter holiday from April last year, a handful of early-to-report retailers delivered strong March comparable-store sales.
Still, the jury is out on early spring sales as a number of large retail chains, including Federated Department Stores, Wal-Mart and Sears, said earlier this week that their sales in the later weeks of last month fell short of expectations.
“The early returns are not what retailers expected,” Steven Skinner, a partner in the retail industry group at Accenture, said. “It looks like the momentum the industry had in early March and February did not sustain through Easter.”
Still worse for those retailers who did not capture enough of consumers’ dollars in March, retail watchdogs are bracing for difficult comparisons in April, due to the calendar shift and less full-price selling. A number believe it will be necessary to combine March and April results to get a firm grasp of spring results.
For example, The Neiman Marcus Group said that while its 2.5 percent increase in March’s comps benefited from the Easter holiday, the Dallas-based luxury retailer expects April sales to be negatively affected by this change.
Burt Tansky, president and chief executive officer of NMG, said: “We are pleased with our March sales results, but continue to plan sales for the spring season to decline compared to last year.”
Another cause for April’s expected decline is NMG’s decision to eliminate some promotional events that were added last spring in an effort to reduce inventory levels. But on the flip side, lower inventories and fewer promotions could lead to gross margin expansion and higher profits.
Comps at NMG’s retail stores — including Neiman Marcus stores and Bergdorf Goodman — rose 3.2 percent on a 3.6 percent increase in total revenues to $269 million. Top categories were women’s contemporary sportswear, ladies’ shoes, precious jewelry and cosmetics. Comps at Neiman Marcus Direct decreased 6.9 percent, due to the elimination of unprofitable catalogs.
“It was still a decent quarter,” Eric Beder, an analyst with Ladenburg, Thalmann & Co. Inc., said, adding that NMG will be among the big winners when high-end consumers return.
While better stores continue to struggle for the attention of the high-end customer, value-oriented retailers with moderate price points are clearly ringing in stronger receipts as consumers of various demographic stripes remain cautious about the economy.
Christopher & Banks Corp., a Minnesota-based, moderate-price specialty retailer of women’s apparel, reported a 12 percent increase in March comps on a 41 percent increase in total sales to $23.3 million.
“While the retail environment remains challenging, we are encouraged by our March performance,” Bill Prange, chairman and ceo, said in a statement. “We experienced robust sales during the final week of the month.” Still, he noted that roughly half of the monthly comp increase was attributable to the calendar shift and that April’s results are expected to be flat with those of April 2001.
The company also announced that it has increased its revolving credit facility with Wells Fargo Bank Minnesota N.A., to $25 million from $18 million, subject to inventory levels. In addition, it negotiated a two-year extension to the credit facility with a new maturity of June 30, 2004. The revolving credit facility is available for seasonal working capital needs and other general corporate purposes.
Investors were pleased with C&B’s results, sending shares north $4.54, or 15.2 percent, to close Thursday at $34.40 in Nasdaq trading.
Other moderate-price specialty retailers reporting strong comparable-store results in March include Suffern, N.Y.-based Dress Barn and Philadelphia-based Deb Shops, up 12 percent and 8.9 percent, respectively.
Another Philadelphia-based retailer, Mothers Work, a retailer of maternity apparel, delivered a 7.6 percent same-store sales hike on a 20.8 percent net sales increase to $43.2 million in March.
The strong March showing concludes a second quarter for Mothers Work that saw net sales increase 17.8 percent to $104.9 million on a 3.9 percent comp increase.
In a statement, Rebecca Matthias, president and chief operating officer of the firm, said that, based on strong sales and margins and tight expense controls, Mothers Work expects earnings for the just-concluded quarter “will show significant improvement compared to last year and will be materially better than current analyst earnings estimates as reported by First Call.”
First Call had Mothers Work penciled in for a 51-cent-a-share loss.
The upbeat results and forecast pushed up Mothers Work’s shares $5.08, or a lofty 32.9 percent, to close at $20.50 on the Nasdaq, blowing past their previous 52-week high by $3.75. Volume was more than 25 times its daily average.
Guess Inc. reported a 6 percent rise in March comps, comprised of a 11.2 percent increase at its full-priced retail stores and a decrease of 5.1 percent at its factory outlet stores.
Retail shares outperformed the overall market as the S&P Retail Index moved up 1.6 percent, to 934.67. On the other hand, the Dow Jones Industrial Average moved up a more modest 36.88 points, or 0.36 percent, to 10,235.17.
The rest of the industry is expected to report March results next Thursday.
According to the UBS Warburg’s softlines comp-sales preview for March, specialty store comps are projected to decrease 1.7 percent in March, versus a year-ago decline of 4.4 percent that was offset by a 1.7 percent increase in teen retailers comps. Off-price apparel retailers are expected to post a gain of 1.5 percent compared with a decline of 2.1 percent last March.
One teen retailer that had long enjoyed strong results, American Eagle Outfitters, has been locked in a fierce battle with its more fashionable competitors and is failing to win over Wall Street. Jennifer Black at Wells Fargo Securities said in a research note that AEO’s March and April comps will be negatively impacted by a lack in its spring assortment of the peasant/bohemian-inspired apparel currently in hot demand among teenagers and fashion-conscious women. As a result, the analyst lowered her first-quarter and full-year earnings-per-share expectations to 18 cents and $1.63 from 22 cents and $1.67, respectively. Black indicated that she expects March comps to finish in the negative mid-single digits.
Still, Black reiterated a “strong buy” rating, noting AEO has “substantial opportunity to outperform as its comes up against more favorable comparisons and has increased presence of peasant/bohemian-inspired apparel within its stores.” She said she expects shipments of the new looks to arrive April 24.
On Wednesday, Buckingham Research Group downgraded AEO to “accumulate” from “strong buy.”
Teen retailers like Charlotte Russe, Too and Wet Seal, which appear to be in strong stock positions with the right looks this spring, are expected to be the big winners when results come out next week, outrunning the more basic offerings and lower inventory levels of Gap and AEO.

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