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Retail stocks dip after same-store data

By Russ Britt & Jennifer Waters
Aug. 5, 2004

LOS ANGELES (CBS.MW) - A number of retail stocks dipped after the sector reported same-store data on Thursday, even though some companies reported favorable comparisons.

The S&P Retail Index ($RLX: news, chart, profile) fell by 2 percent, or 7.14 points to 369.00 in midday trading.

Retail sales results from July rose 3.4 percent, on a same-store basis, reflecting a general slowdown in spending. See full story.

Among stock dives, Wet Seal Inc. (WTSLA: news, chart, profile) was hardest hit, plunging 30 percent, or $1.24, to $3.02, in midday trading after the teen-wear retailer missed same-store sales expectations amid a management shakeup.

Shares bottomed to a fresh low $2.95. Wedbush analyst Adrienne Tennant urged clients to "hold" the stock, noting that "a major insider sale, Irv Teitelbaum stepping down as chairman, and a slower start to the back-to-school selling season suggests the turnaround is getting much more difficult to effect." She said her earlier call to "buy" the stock was "wrong."

Others reporting lower sales included Dollar Tree Stores (DLTR: news, chart, profile) and Gap (GPS: news, chart, profile), and both felt the effects. Dollar Tree toppled by $1.92, or 7.1 percent, to $24.94 while The Gap dropped $1.37, or 6.4 percent, to $20. Both lowered expectations for the coming quarter.

Ann Taylor (ANN: news, chart, profile) lost better than 9 percent, or $2.36, to $23.48 while Abercrombie & Fitch (ANF: news, chart, profile) tumbled $2.20,or 6.2 percent, to $33.61.

Sharper Image (SHRP: news, chart, profile) hit a 52-week trough of $19.56 before easing slightly to $19.71, off $5.78, or 23 percent. Citing less productive advertising and a lower gross margin rate, the gadgets retailer lowered its second-quarter profit projection to a range of 3 cents to 5 cents a share.

For the year, Sharper Image now sees per-share earnings in a range of $1.83 to $1.87 from an earlier forecast of $2 to $2.04 a share. The average estimates of analysts polled by Thomson First Call are for earnings of 10 cents a share for the quarter and $2.01 cents a share for the year. The revised outlook came as Sharper Image said July same-store sales were equal to last year's levels.

Pier 1 Imports (PIR: news, chart, profile) shares backtracked to a 52-week low of $15.77. The home-furnishings retailer said fiscal second-quarter earnings would miss expectations as same-store sales are expected to continue to decline because of weak store traffic and a calendar shift in the Labor Day weekend into September.

Pier 1 now expects per-share earnings of 10 cents to 12 cents for the quarter ending August, vs. the First Call estimate of 13 cents. In July, same-store sales fell 1.3 percent from year-earlier levels, while total sales rose 7.2 percent to $138.9 million. The company expects August same-store sales to decline 4 percent to 8 percent.

Sanders Morris Harris analyst Crystal Lanigan slashed her recommendation to "hold" from "buy," noting that an "ineffective marketing initiative" was offsetting improvements in merchandise mix. Earlier this year, Pier 1 ousted actress Kirstie Alley for Thom Filicia from "Queer Eye for the Straight Guy."

One of the few in positive ground was Ross Stores (ROST: news, chart, profile), which bucked the post-July sales downward trend by climbing 71 cents, or 3.2 percent, to $23.21.

But the stock climb at Ross was puzzling to analysts. While the company's sales were up, they weren't up by a large amount. Further, its forecast was disappointing to many on Wall Street. Some speculated the company's improvements on its troubled merchandising system might have helped, but not enough to offset bleak forecasts.

"The numbers weren't good and the guidance was worse," said Gary Holdsworth, analyst at Wedbush Morgan. "This is a sick company right now and it's not getting better."

Among major issues, Wal-Mart (WMT: news, chart, profile) said it met sales expectations, but lost 89 cents, or 1.7 percent, to $52.31.




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