Shares of May Fall on Profit Warning

Shares of May Department Stores Co. fell as much as 6% on Monday after the company warned that sluggish sales would push quarterly profit below most Wall Street forecasts.

The warning, one week after J.C. Penney Co. raised its earnings forecast on strong sales, highlighted the widening gap between department stores and lower-priced retailers as a slumping economy keeps consumers frugal.

St. Louis-based May, parent of the Lord & Taylor, Robinsons-May and Filene’s chains, said it expects to post a profit of 8 cents to 10 cents a share, excluding charges for division combinations and early debt redemptions, for its fiscal third quarter ended Saturday.

Analysts’ estimates ranged from 10 cents to 21 cents a share, with an average of 17 cents, according to research firm Thomson First Call.

The stock closed down 55 cents at $22.89 on the New York Stock Exchange after falling as low as $22.12 during the session. The stock underperformed the Standard & Poor’s retailing index, which was down 0.7%.

A slowdown in consumer spending has hit higher-end department stores especially hard as a sputtering U.S. economy draws shoppers to discounters.

“In times like this, anything that has a little bit more of a value orientation to it is going to be a gainer -- Wal-Mart, Target, Costco, some of the off-priced retailers,” said Nancy Aversa, a Victory Capital Management analyst whose firm holds May shares among its roughly $70 billion under management.

Many retailers have reported a drop in traffic at malls, another blow to Lord & Taylor and other department stores that anchor those shopping centers.

May said October sales at stores open at least one year fell 7% in the four weeks ended Saturday, the sixth consecutive monthly decline.

May’s third-quarter sales, which include October’s results, fell 4% to $3.05 billion from $3.18 billion in the same period last year.

“It really is still just a difficult economy and a challenging retail environment,” May spokeswoman Sharon Bateman said when asked why sales were weak. “Our sales continue to be soft across the country.”