Four clothing retailers deliver mixed bag of earnings reports
Gap Inc. on Thursday logged its first earnings gain in seven quarters but joined other California apparel retailers in lowering profit projections more than expected as shoppers looked to bag ever bigger bargains.
Taking a cue from customers, many retailers have adopted a cautious mood. Among those trimming forecasts for the current quarter are Anaheim-based Pacific Sunwear of California Inc., Foothill Ranch-based Wet Seal Inc. and Bebe Inc. of Brisbane.
Shoppers are skittish amid a wave of economic uncertainties, including a slumping housing market and a gyrating stock market. The high rollers are still spending, but others have pulled back.
“There’s a big difference between the haves and the have-nots,” said Christine Chen, an analyst at Needham & Co. “The A malls are busy, the B malls are not.”
And that does not bode well for the holiday shopping season.
“I think the die is cast on the holiday as being weak,” said Robert Buchanan, an analyst at A.G. Edwards & Sons. “I think back-to-school and early fall really helped to set the tone. Clearly, business is not good.”
Gap, which has eliminated 2,200 positions this year as it streamlines its business, has been in a three-year sales slump. But it made some headway in the fiscal second quarter.
The parent of almost 3,100 Gap, Old Navy and Banana Republic stores said earnings rose 19% to $152 million, or 19 cents a share, for the period ended Aug. 4, compared with $128 million, or 15 cents, a year earlier. Profit was in line with analysts’ expectations. Sales fell 1% to $3.69 billion from $3.7 billion in the year-earlier period.
Gap cut per-share profit projections for the fiscal year to 83 cents to 88 cents. Analysts had expected earnings of 93 cents.
Meanwhile, Gap’s new chief executive, Glenn Murphy, said he had been traveling the country, touring stores, meeting with employees and getting “grounded in the business.”
“It’s been a good beginning,” said Murphy, a former Canadian drugstore executive.
He didn’t indicate whether he planned to unveil any major changes but said he supported turnaround efforts that already are underway.
Gap, which has been buying back stock since 2004, also said that its board had authorized purchasing an additional $1.5 billion worth of shares.
The top priority for the company is stabilizing its two largest chains -- Gap and Old Navy -- and giving shoppers a reason to return to the stores.
Analyst Chen said she wanted to be reassured that Murphy, who has no background in apparel, would not try to shake things up too much for its namesake chain, which she thought was already on the right track with its new merchandise.
“That would scare me,” she said.
Buchanan said he was reserving judgment for now.
“At this point, he’s still on a fact-finding mission, so he hasn’t been able to articulate any grand scheme,” Buchanan said. “It’s very early, and clearly he did some good things up in Canada. We’ll see if he’s a quick study when it comes to fashion.”
Teen retailer Pacific Sunwear said it lost $10.5 million, or 15 cents a share, in its second quarter ended Aug. 4, compared with a profit of $9.7 million, or 14 cents, in the same period last year. Analysts were expecting profit of 7 cents a share. Sales rose 10% to $344.2 million from $313.7 million.
The retailer had twice before cut profit projections for the quarter, the last time by about two thirds. Charges associated with the previously announced closure of the company’s One Thousand Steps shoe chain and 72 of its urban themed demo stores together accounted for 21 cents of that per-share loss.
PacSun said it expected fiscal third-quarter profit of 10 cents to 13 cents, not the 25 cents forecast by Wall Street analysts.
Wet Seal, which also targets teens, said its earnings rose to $6.8 million, or 7 cents a share, for the fiscal second quarter ended Aug. 4, a penny more than analysts were predicting. That was a 54.5% increase from a profit of $4.4 million, or 4 cents, in the same period last year.
Sales rose to $143.3 million from $129.5 million, but results were lower than the company had previously expected.
Wet Seal forecasts fiscal third-quarter earnings of 7 cents to 10 cents a share. Analysts expected 11 cents.
Bebe, which sells trendy clothes to young women, said earnings fell 10% to $19.7 million, or 21 cents a share, for its fiscal fourth quarter ended July 7, from $21.9 million, or 23 cents, a year earlier. That was 2 cents more than analysts had expected.
Sales rose 16% to $670.9 million from $579.1 million.
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