Tags: retailers | LTD | GPS | ANF

Clothing Retailers Likely to Post Mixed Results

By    |   Friday, 03 Feb 2012 06:29 AM

For specialty retailers, the holiday season is the make-or-break period of the year. These companies can generate up to half of annual profits in November and December. Specialty clothing retailers Limited Brands (LTD), Gap (GPS) and Abercrombie & Fitch (ANF) are likely to end up posting mixed results for the recent holiday sales period.

The Gap retails clothing and accessories under its name-brand stores plus its Banana Republic and Old Navy stores. In December, the company reported a 1 percent decline in sales compared to December 2010. Comparable store sales were down 4 percent for the month.

Chairman and CEO Glenn Murphy, commenting on the monthly results, noted "...our performance was below our expectations.” The Wall Street consensus earnings estimate for the 2011 fourth quarter is earnings of 36 cents per share, compared to 60 cents in the 2010 fourth quarter.

Abercrombie & Fitch ran into problems back in its 2011 third quarter. For the quarter, the company reported revenue gains of 21 percent compared to a year earlier, yet earnings were flat in comparison. The 57 cents per share reported earnings missed the consensus estimate by 20 percent.

ANF’s share price declined by 40 percent and has not yet recovered. Analysts expect high costs which affected third quarter results will have a similar impact when the fourth quarter numbers come out.

It appears Limited Brands, however, will report excellent fourth quarter results based on strong holiday sales from its Victoria's Secret brand. In early January the company reported a same store sales increase of 7 percent for the last five weeks of 2011.

Eighteen of the 21 Wall Street analysts following LTD have increased their earnings estimate for the quarter. On top of that, Limited Brands has exceeded the consensus estimate for at least the last four quarters.

Execution


All three of these specialty retailers report fourth quarter results later in February. The share prices of Gap and Limited Brands are little changed since the third quarter results were released.

The recent holiday season in a tough economy will result in some winners and losers. Those companies which can bring out attractive products and manage costs — such as Limited Brands — should reward investors. A failure to handle all aspects of business will lead to investor disappointment.

LTD next reports on Feb. 22, GPS on Feb. 23, ANF on Feb. 15.

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2012-29-03
Friday, 03 Feb 2012 06:29 AM
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