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Many Retailers Meet Lower Forecasts

Weather and falling consumer confidence hurt second-quarter earnings, but some predict a pickup.

August 13, 2003|From Reuters

J.C. Penney Co. and other U.S. retailers Tuesday posted fiscal second-quarter results largely in line with lowered expectations after uncooperative weather and waning consumer confidence dented demand.

However, some retailers predicted stronger sales in the coming months, saying the U.S. economy was showing signs of recovery and recent tax rebates should provide a much-needed boost during the back-to-school shopping season.

J.C. Penney said a second-quarter rebound in department store sales compensated for what it called "clearly disappointing" demand at its Eckerd drugstore chain.

The Plano, Texas-based chain said it broke even in its quarter ended July 26, compared with a year-earlier loss of $6 million. After the payment of preferred dividends, its per-share loss narrowed to 2 cents from 5 cents.

Analysts on average were expecting a loss of 5 cents.

J.C. Penney's sales rose 1.6% to $7.3 billion. Sales at stores open at least a year -- an important financial marker for retailers -- increased 2.1% at department stores but dipped 0.8% at Eckerd.

For the third quarter, the company said it still expects flat to slightly higher same-store sales at its department stores.

May Department Stores Co. reported operating income slightly above Wall Street expectations. The St. Louis-based retailer reported a quarterly loss of $110 million after a $318-million charge for closing 34 stores. Excluding the charge, earnings in the period ended Aug. 2 of $92 million, or 30 cents a share, were below last year's $106 million, or 34 cents. Sales fell 1% to $3 billion.

Meanwhile, discounter TJX Cos., parent of TJ Maxx and Marshall stores, met its lowered forecast of $123.3 million, or 24 cents a share, in its second quarter ended July 26. That contrasted with $129.6 million, or 24 cents, in the same period last year. Sales rose 10% to $3.05 billion.

Abercrombie & Fitch Co., the youth-oriented clothing retailer, reported increased second-quarter profit as cost controls and less discounting improved margins.

The retailer earned $34.8 million, or 35 cents a share, in its quarter ended Aug. 2, up from $31.1 million, or 31 cents, a year ago. Analysts, on average, expected per-share earnings of 34 cents.

Abercrombie said sales increased 8% to $355.7 million. Sales at stores open at least a year fell 8%.

U.S. retailers grappled with rising unemployment and waning consumer confidence last quarter, which prompted many consumers to delay all but essential purchases. To make matters worse, an unusually cool, wet spring curbed demand for summer clothing.

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