Posted on: Friday, November 30, 2001

Pricier retailers see earnings slump

By Heather Landy
Bloomberg News Service

NEW YORK — Neiman Marcus Group Inc.'s quarterly earnings fell 54 percent, and Barnes & Noble Inc. had a wider loss, as consumers shopped at lower-priced chains while the economy slipped into recession.

Net income plunged 93 percent at J. Crew Group Inc. because of falling sales at the company's clothing stores. Watchmaker Movado Group Inc.'s profit fell 40 percent and the company cut 11 percent 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 trying 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 including Limited and Nordstrom.

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

Sales fell 10 percent to $681.1 million, and declined 11 percent 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. There will be more price reductions than the last, the company 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 Officer Burton Tansky said in a conference call with investors.

Barnes & Noble, the biggest U.S. book chain, said its fiscal third-quarter loss widened to $6.8 million, or 10 cents a share, from $5.2 million, or 8 cents, a year ago. Results matched the reduced forecast issued by the company on 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 percent to $995.6 million, it said.

Movado, which makes and sells Movado, Coach and Concord watches, said net income declined to $7.52 million, or 63 cents a share, from $12.6 million, or $1.07, a year earlier. Sales in the period ended Oct. 31 dropped 14 percent to $90.1 million.

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 dropped 3.3 percent to $195.6 million, as a decline at the clothing company's 130 retail stores outweighed an increase in catalog sales.