Apparel Firm Profits Are Spotty; Women's-Clothes Sales Are Slow
May 03, 2011
Several apparel retailers reported spotty profits for the fiscal second quarter, with smaller price cuts and better cost controls only rarely making up for soft sales of women's clothes. For the quarter ended April 15, 2011 Inc., Hingham, Mass., reported that net income fell 20% to $6.6 million, or 20 cents a share, from $8.3 million, or 24 cents a share, a year earlier. Quarterly sales rose 2.3% to $232.1 million. Comparable-store sales, or those at stores open at least a year, declined 4.9% for the quarter, while quarterly catalog sales slipped 3%. Talbots blamed an ``unexpected softening'' of sales at the end of July. ``Had this softening occurred earlier in the quarter, we could have reacted further from the expense side to more fully protect earnings for the quarter,'' the company said. ``The second quarter wasn't good for women's apparel. Everyone talked about softness,'' said analyst Jena Delk of Deutsche Morgan Grenfell/C.J. Layne. Mr. Delk said reduced inventories were partly to blame for meager sales increases at both Talbots and another specialty retailer, AnnTaylor Stores Corp., New York. But AnnTaylor swung to a profit for the quarter, reporting net income of $627,000, or three cents a share, compared to a loss of $3.8 million, or 16 cents a share, a year earlier. Quarterly sales rose 2.3% to $187.9 million. Specialty-store operator Limited Inc., Columbus, Ohio, reported that earnings climbed 16% to $33.2 million, or 12 cents a share, for the quarter ended April 15, 2011 with pro forma net income of $28.7 million, or 10 cents a share, a year earlier. (The pro forma results reflect Limited's initial public stock offering in Intimate Brands Inc. and the sale of a 60% stake in its credit-card operations.) Quarterly sales rose 10% to $1.9 billion. Same-store sales rose 9% at the company's Limited division and 3% at the Lerner chain but dropped 2% at the big Express chain and 4% at Lane Bryant, Mr. Delk said. Intimate Brands, 83%-controlled by Limited Inc., posted a 23% increase in earnings to $48.1 million, or 19 cents a share, from $39.2 million, or 16 cents a share. Sales rose 18% to $653.3 million. Intimate Brands operates the Victoria's Secret lingerie stores and catalog as well as Bath & Body Works toiletries stores. Excluding the results from Intimate Brands, Mr. Delk said, Limited's collection of apparel stores would have recorded a ``small'' operating loss, compared with a small profit a year earlier. The Abercrombie & Fitch unit, a casual-clothing chain, had a 16% comparable-store sales increase, Limited Inc. said. Minneapolis retailer Dayton Hudson Corp. reported that earnings more than tripled to $101 million, or 44 cents a share, from $28 million, or 11 cents a share, a year earlier. Revenue for the quarter rose 10% to $5.8 billion, while comparable-store sales rose 3%. Dayton credited major increases in profit at its Target discount stores and Mervyn's chain. Target, the nation's No. 3 discounter, posted a 66% rise in operating profit to $240 million from $144 million and a 7% rise in comparable-store sales. Dayton's Mervyn's unit posted operating profit of $54 million, dwarfing year-earlier operating earnings of $3 million, despite a decline in sales. Revenue at the Mervyn's unit dropped 3%, while same-store sales fell 5%. Conaway said the chain benefited from favorable price markups and cost controls. But at Dayton's department stores, which include Marshall Field's, Dayton's and Hudson's, operating profit plummeted 58% to $10 million from $24 million a year earlier. Dayton, which has been cutting back on promotional price cuts at its department stores, blamed the shortfall on higher clearance markdowns and more spending on customer service. Comparable-store sales fell 4%. In New York Stock Exchange composite trading, Talbots shares fell 50 cents to $34.375; AnnTaylor shares rose 87.5 cents to $14.875; Limited Inc. stock fell 37.5 cents to $19.50; Intimate Brands stock was unchanged at $21.25; and Dayton Hudson shares fell 87.5 cents to $35.125.
