Retailers Are Foundering A Bit As They Enter New Year
January 10 2012 - 12:17PM
Dow Jones News
Signaling a rocky start to the year, retailers are saying that
business is spotty and issuing an unusually large amount of
earnings warnings.
The outlooks are chalked up to everything from warm weather to
increased promotions and now, with Tuesday's round of warnings,
global economic conditions.
The commentary comes at a crucial time for retailers, which want
to at least start the year with a clean slate, but find their
troubles are likely to linger.
"I have to believe holiday results have put them on their guard
for 2012," said Margaret Whitfield, retail analyst at Sterne
Agee.
Holiday sales tallied in the fourth quarter can account for
one-fifth or more of annual revenue for retailers and are a major
barometer of the willingness of all types of retailers to
spend.
But with the fourth quarter ending for most retailers at the
close of this month, negative earnings announcements are running at
more than double the pace they did in last year's fourth quarter,
according to Thomson Reuters. Out of the 117 retailers that have
provided guidance, 76 now expect to miss those projections, only 33
expect to exceed them and the rest are in-line with their
outlooks.
The latest round of alerts were led by Tiffany & Co. (TIF),
which on Tuesday cut its full-year earnings forecast following a
holiday season dampened by conservative holiday spending in the
U.S. and Europe. The warning added to worries that economic
uncertainties in the regions have severely dampened demand from
luxury shoppers. Lower-priced jewelry purveyor Signet Jewelers Ltd.
(SIG) also gave a cautious profit target while Zale Corp. (ZLC)
said it anticipates lower operating margin amid higher marketing
costs.
Also on Tuesday, consumer electronics retailer Hhgregg Inc.
(HGG) cut its full-year earnings estimate, citing
lower-than-expected margins in the video category and increased
spending on advertising to gain market share and launch its mobile
category. And Jones Group Inc. (JNY) reduced its fiscal 2011
revenue guidance and expects fiscal first-quarter revenue to fall
short of analysts' estimate due to its need to increase promotions.
The owner of brands such as Nine West, Jones New York and RachelRoy
also cut its full-year revenue projection.
There were some bright spots Tuesday, with yoga-wear maker
Lululemon Athletica Inc. (LULU) bumping up its guidance for the
current fourth quarter after revenue for the period got a boost
from an increase in inventory. And shoe retailer DSW Inc. (DSW)
raised its full-year guidance for the fourth time, with plans to
accelerate its new-store-opening plans due to the strength of its
holiday sales.
But most of the news has been downbeat. In same-store sales
delivered for the holiday month of December, Target Corp. (TGT)
missed its goal with a 1.6% rise in sales, leading it to cut its
profit forecast. Kohl's Corp. (KSS) posted a 0.1% drop in
same-store sales and also reduced its fourth-quarter earnings view.
The department-store chain cited sluggish sales of cold-weather
wear because of unseasonably warm temperatures during the holiday
season. J.C. Penney Co. (JCP) posted a 0.3% rise in
comparable-store sales, softer than the company had expected, and
cut its profit outlook. American Eagle Outfitters Inc. (AEO)
slashed its fiscal-fourth-quarter earnings outlook after it was
forced to offer more aggressive promotions to drive late holiday
sales.
-By Karen Talley, Dow Jones Newswires; 212-416-2196;
karen.talley@dowjones.com
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