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Retailers Forced To Trim Earnings Forecasts

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The Associated Press

Published: October 12, 2007

NEW YORK - Several of the nation's largest retailers cut their earnings forecasts Thursday after lingering summer weather and an uncertain economy kept consumers from shopping last month and left the big merchants with disappointing sales.

As the store owners reported September sales figures Thursday, the biggest losers were apparel sellers, including Limited Brands. and Gap.

Target Corp., J.C. Penney Co., Limited Brands and Nordstrom were among those lowering their earnings outlooks.

Wal-Mart Stores posted a modest sales gain that was slightly below analysts' expectations, but raised its third-quarter profit outlook because of cost-cutting.

Michael P. Niemira, chief economist at the International Council of Shopping Centers, estimated the weather depressed sales results by 0.5 percentage point.

The ICSC-UBS tally of retail sales rose a slim 1.7 percent in September, compared with 4 percent in the year-ago period and a forecast for a 2.5 percent gain. Excluding the effect of the weather, the results were in line with a 2.3 percent spending pace seen since February, the start of the fiscal year for merchants.

Wal-Mart reported a 1.4 percent increase in same-store sales, slightly below the 1.8 percent estimate from analysts surveyed by Thomson Financial.

Target said same-store sales increased a slim 1.2 percent, dragged down by weak apparel sales. Analysts had expected a 2.2 percent increase.

Macy's posted a 2.7 percent drop in same-store sales, worse than the 1 percent projection. In a statement, Terry J. Lundgren, chairman, president and chief executive, said sales were depressed from the year-ago period, which benefited from the major launch of more than 400 former May stores to the Macy's nameplate. He also blamed warm weather for hurting sales.

Penney suffered a 4.6 percent drop in same-store sales, well below analysts' 0.1 percent forecast. The company slashed its third-quarter earnings forecast to $1 to $1.04 per share, compared with the previous guidance of $1.28.

Nordstrom had a 3.2 percent gain, below the 5 percent estimate. The company lowered is third-quarter profit outlook as a result of disappointing sales. It also said larger than planned markdowns used to clear excess inventory will hurt profits for the remainder of the year.

Saks, however, had a 7.7 percent in same-store sales, though results were below the 9.9 percent estimate.

Gap, which has long been languishing, suffered a 7 percent drop, worse than the 4.6 percent Wall Street expected.

Mothers Work suffered a 7 percent drop; analysts had expected an 8.5 percent decline.
Limited Brands had a 4 percent drop in same-store sales, worse than the 1.5 percent forecast. The clothing retailer lowered its third-quarter earnings guidance, saying it may not earn a profit.

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