Bloomberg News

American Eagle, PetSmart See Slump in Glum Day for Retailers (2)

May 21, 2014

Inside an American Eagle Outfitters Store

Customers shop inside an American Eagle Outfitters Inc. store in San Francisco. Photographer: David Paul Morris/Bloomberg

American Eagle Outfitters Inc. (AEO:US) announced plans to close an additional 150 stores after posting sluggish sales today, joining a cluster of North American retailers with lower-than-predicted results.

The teen-apparel chain, which is seeking a new chief executive officer, will close the locations over the next three years. Last quarter, sales at stores open at least a year declined 10 percent, worse than the 7.8 percent drop analysts had estimated. Shares of the Pittsburgh-based company (AEO:US) fell 6.4 percent to $10.60 at the close in New York.

Retailers including PetSmart Inc. (PETM:US), Target Corp. (TGT:US) and Sears Canada Inc. (SCC) also reported same-store sales declines today, underscoring the impact of a particularly cold winter and still-shaky consumer confidence. Not all companies are suffering: Tiffany & Co. (TIF:US), the luxury-jewelry chain, beat profit estimates today and raised its annual forecast. At the lower end of the scale, though, it remains a tough environment for retailers, said Ken Perkins, president of research firm Retail Metrics Inc.

“They’re facing significant consumer headwinds,” said Perkins, whose firm is based in Swampscott, Massachusetts. “Most middle-income and lower-income consumers don’t have much discretionary money.”

PetSmart, the largest pet-store chain, cut its annual earnings forecast to $4.29 to $4.39 a share, down from a range of as much as $4.54. Comparable-store sales dropped 0.6 percent last quarter, missing the 1.5 percent gain that analysts had estimated. Its stock dropped 8.3 percent to $57.02, marking the biggest one-day decline in more than a year.

‘Volatile’ Environment

“We did not achieve our sales goals, which were impacted by a challenging and volatile consumer environment and a competitive market,” David Lenhardt, CEO of Phoenix-based PetSmart, said in a statement.

At Sears Canada, a department-store chain that’s majority-owned by Sears Holdings Corp. (SHLD:US), its quarterly net loss widened to C$75.2 million ($69 million), or 74 cents a share, from C$31.2 million, or 31 cents, a year earlier. Sales fell 11 percent to C$771.7 million.

The business’s struggles have prompted its U.S. parent to consider a sale or spinoff of its remaining 51 percent stake. Sears Holdings, run by hedge-fund manager Eddie Lampert, said last week that it will hire an investment bank to study options for the Canadian operation, which has a total market value of about $1.4 billion.

Frostbitten Sales

In the most recent quarter, a late spring took a toll on sales, Sears Canada CEO Douglas Campbell said today.

“Sales of spring merchandise were below last year, as winter-like weather was prevalent in most parts of the country well into the new season,” he said in a statement.

Even as shopping-mall traffic slows, consumers are spending money elsewhere, Perkins said. That includes big-ticket items such as cars, as well as mobile-phone and cable bills, he said. That diversion of funds is contributing to a slower recovery for the retail industry.

“Unfortunately, it doesn’t look like any sort of significant snapback or rebound that everybody was hoping for,” Perkins said.

To contact the reporters on this story: Lauren Coleman-Lochner in New York at llochner@bloomberg.net; Lindsey Rupp in New York at lrupp2@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net


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Companies Mentioned

  • AEO
    (American Eagle Outfitters Inc)
    • $13.53 USD
    • 0.02
    • 0.15%
  • PETM
    (PetSmart Inc)
    • $81.16 USD
    • 0.03
    • 0.04%
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