CHARMING SHOPPES RELEASES FIRST QUARTER SALES WARNING

Byline: Jennifer Weitzman

NEW YORK — Charming Shoppes became the latest specialty retailing chain to issue a warning about its first-quarter financial expectations.
Despite improvements in its last quarter, the Bensalem, Pa.-based retailer of moderately priced junior, misses’ and large-size apparel, accessories and footwear said that based on current sales trends, it projects comparable-store sales to undergo a decline in the low-single-digit range in the quarter. In addition, the company said it expects earnings in the range of 7 to 8 cents for the quarter and 53 to 56 cents for the year, falling short of consensus estimates of 9 cents and 56 cents, respectively.
But with the plus-size business growing at triple the pace of the overall women’s apparel business and with Charming Shoppes capturing 20 percent of that business, Bear, Stearn’s analyst Brian Tunick said the company is well positioned for continued growth. “It is a matter of execution, right fashion and the economy and weather cooperating,” he said. “They have grown their store base, primarily through increasing the plus-sized units to 54 percent of its total company.”
And over the next 5 years, the company indicated it believes it can add another 1,000 stores, about 750 of them dedicated to the plus-size side. The company said it plans to double the 400-unit Catherines and the 110-unit Answer and Added Dimensions store base, growing the Fashion Bug Plus stores by 250 stores while scaling back Fashion Bug’s growth.
For the quarter ended Feb. 3, the company reported a 12 percent increase in earnings to $9.1 million, or 9 cents a share, including a 1-cent gain from an accounting change. That compares with earnings of $8.1 million, or 8 cents. The performance in the quarter matched analysts’ expectations of 8 cents exclusive of the special gain.
Benefiting from the acquisition of Catherines Stores, the company said sales improved 25 percent to $434.7 million from $348.4 million, while comparable-unit sales fell 1 percent. The Catherines division sales rose 149.9 percent to $93.9 million, and comps increased in the mid-single-digit range while Fashion Bug sales rose 10 percent and comps were down 1 percent.
Dorrit J. Bern, chairwoman and chief executive, said on a conference call that while the winter weather forced it to close as many as 195 stores, customers responded well to new spring merchandise in the parts of the U.S. where weather was not an issue.
“Charming Shoppes displayed considerable consistency in a tough retail environment,” said Bernard Sosnick with Fahnestock & Co., adding that he was impressed with its ability to control inventories and its emphasis and commitment to large sizes.
For the year, income improved 32 percent to $51.6 million, or 49 cents, from $39.2 million, or 38 cents. Sales increased 34 percent to $1.61 billion from $1.2 billion.
Bern declined comment on the possibility that, looking to build further on its plus-size business, Charming might pursue an acquisition of Lane Bryant, which Limited has said it intends to sell.
Best-performing categories include plus-size and junior sportswear, intimates, coats and shoes.
Inventory ended the quarter on plan, with sharp decreases in winter merchandise and moderate decreases in spring.