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High-End Retailers' Profits Fall

Earnings: Companies such as Neiman Marcus and Barnes & Noble hurt by those offering big discounts.

November 30, 2001|From Bloomberg News

Neiman Marcus Group Inc.'s quarterly earnings fell 54% and Barnes & Noble Inc. had a wider loss as consumers shopped at lower-price chains while the economy turned downward.

Net income plunged 93% at closely held J. Crew Group Inc. because of falling sales at the company's clothing stores. Watchmaker Movado Group Inc.'s profit fell 40% and the company cut 11% of its work force.

Retailers slashed prices on jewelry and designer clothes as customers who began shopping at pricier stores such as Neiman Marcus in the 1990s pulled back as the economy contracted, analysts said. J. Crew and other specialty merchants struggled to keep up with the low prices of discounters such as Wal-Mart Stores Inc.

"You saw a lot more sales and people trying to clear inventories during the third quarter before the holiday season, so they got hit," said Maria Azari, portfolio manager for Cambiar Investors, which owns retail shares that include Limited Inc. and Nordstrom Inc.

Neiman Marcus shares fell 59cents Thursday to $30.21 on the New York Stock Exchange after the Dallas-based luxury chain said it would lower prices again this quarter to get inventory levels back in line with demand.

Barnes & Noble shares rose $2.89 to $29.90 on the NYSE. The company said sales at superstores open at least a year rose 3.2% in the first 24 days of November, including a 4% increase Thanksgiving weekend.

Consumers may be choosing to buy books as substitutes for more expensive items, Azari said.

Movado, which makes and sells Movado, Coach and Concord watches, eliminated about 44 jobs in the fiscal third quarter as sales and earnings fell.

Net income fell to $7.52million, or 63 cents a share, from $12.6 million, or $1.07, a year earlier. Sales in the period ended Oct. 31 dropped 14% to $90.1 million, the Paramus, N.J.-based company said.

Movado, which said the job eliminations would generate savings of $3.8 million a year, rose $1.10 to $18.05 on the NYSE.

Net income at Neiman Marcus dropped to $23.7 million, or 48cents a share, in the fiscal first quarter, ended Oct. 27. Per-share profit was in line with the 47-cent average estimate of analysts polled by Thomson Financial/First Call. The average forecast was reduced from 61cents last month.

Sales fell 10% to $681.1 million and declined 11% at stores open at least a year. So-called same-store sales will drop again this quarter, by a percentage in the mid-single digits, the chain said.

"The reality is that we are going to have to take additional markdowns in the second quarter to ensure that our inventory is well-positioned for the spring season," Chief Executive Burton Tansky said.

Barnes & Noble, the biggest U.S. book chain, said its fiscal third-quarter loss widened to $6.81 million, or 10 cents a share, from $5.18million, or 8 cents, a year ago. Results matched the reduced forecast issued by the company Nov. 8.

The New York-based company incurred higher costs for a customer-loyalty program and couldn't get the favorable pricing that publishers provide big discounters such as Wal-Mart.

Sales in the quarter ended Nov.3 rose 4.6% to $995.6 million, the company said.

At J. Crew, net income tumbled to $300,000 from $4.5 million in the quarter ended Nov. 3 because of price reductions on slow-selling goods. Sales fell 3.3% to $195.6 million as a decline at the clothing firm's 130 retail stores outweighed an increase in catalog sales.

Revenue at stores open at least a year slid 18% from the year-ago quarter. For the four weeks ending Dec. 1, the company forecast a 25% decline in same-store sales and a 15% drop in catalog and Internet sales.

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