Byline: Thomas J. Ryan

NEW YORK — Shares of Whitehall Jewellers Inc. lost more than half their value Thursday after the jewelry retailer forecast disappointing sales and earnings for its second quarter, as well as continued softness through the third quarter.
Whitehall’s shares closed at 8 3/16, down 9 7/16 or 53.6 percent, in New York Stock Exchange trading.
The Chicago-based firm said that, due to lower-than-expected sales, it sees second-quarter earnings between 2 to 5 cents per share, down from 15 cents a year earlier. Wall Street’s consensus estimate had been 18 cents.
Same-store sales are expected to be flat to slightly lower in the quarter, compared with a 12.3 percent increase last year. Total sales for the quarter ended July 31 should range from $73 million to $75 million, versus $65.9 million.
“The slowdown in sales was primarily a result of a decline in overall unit sales which we believe was driven by a reduced number of impulse purchases,” said Whitehall’s chairman and chief executive, Hugh Patinkin, in a statement. “We expect continued sales and earnings softness through the third quarter.”
He added that “even a low single-digit sales increase in the fourth quarter, driven by strong marketing and promotional efforts along with an improvement in new stores performance, could result in an increase in earnings per share over the fourth quarter of last year.”
Lazard Frere’s analyst Todd Slater said the sluggish impulse sales could be viewed as a sign that higher interest rates are slowing consumer spending on luxury purchases like jewelry.
“This indicates the consumer could be negatively impacted by the series of six [interest] rate hikes” enacted by the Federal Reserve Board, Slater said. “This revelation could impact the entire jewelry sector, especially if the slowdown proceeds into the fourth quarter, which represents 80 percent of the year’s earnings.”
Zale Corp. shares were also hit hard, declining 4 1/2 to 40, while Tiffany’s dropped back 1 7/8 to 75. Both trade on the New York Stock Exchange.
Patinkin said a recent increase of Whitehall’s bank credit facility to $166 million from a maximum of $110 million will allow the jeweler to continue its expansion plan, including the opening of 66 stores this year. The company has 326 stores under the Whitehall, Lundstrom Jewellers and Marks Bros. names and plans to have 500 by the end of 2002.

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