ClothesTime Sales Up but Stock Drops
Some days, you just can’t win for losing. Take, for instance, ClothesTime Inc., whose stock fell Monday on heavy volume after it disclosed what was, by any account, good news.
On Monday, as has been its custom for a couple of years now, the Anaheim women’s apparel retailer gave securities analysts an idea of what to expect for the fiscal first quarter, which ended April 28.
Sales, the analysts were told, would be up 13% compared to last year.
As a result, ClothesTime stock fell $1.50 to $18.25 a share, the victim of a selling frenzy in which nearly 500,000 shares--or about 7% of its outstanding stock--changed hands. Wall Street, it turned out, had been expecting a 25% sales increase.
“We didn’t think that it would have that kind of impact on the stock,” said William Mowbray, ClothesTime’s vice president of finance.
Line Phased Out
During the first quarter of last year, ClothesTime phased out its career-oriented “Missy” line of women’s business apparel to concentrate fully on what it knows best and makes the most money on--casual fashions for a younger crowd.
Some analysts, it seems, didn’t remember the discontinued business apparel line when making their sales estimates. Sales of clothing cut for the post-adolescent crowd actually increased by a hefty 25% over the first quarter of last year.
“The news came out this morning and people sold the stock,” said Fred Windtzer, an analyst with the Baltimore-based brokerage house of Alex Brown Partners. “I guess the analysts forgot to take the ‘Missy’ line into account.”
For its 1986 fiscal year, which ended Jan. 26, ClothesTime posted net earnings of $10 million, more than triple the $3.3 million it earned the year before. For the current year, said ClothesTime’s Mowbray, it is anticipated that net earnings will increase by another 30%.
Analysts agree with the company’s earnings projections, citing ClothesTime’s strong management and knowledge of the apparel industry to justify their optimism.