Improved margins helped Rue 21 Inc. post a better-than-expected improvement in second-quarter profit, but the value-focused teen retailer’s third-quarter earnings outlook missed Wall Street’s expectations.
The Warrendale, Pa.-based firm said after the markets closed Wednesday that, for the period ended July 31, net income grew 20 percent to $6.4 million, or 26 cents a diluted share, compared with profits of $5.3 million, or 23 cents a share, in the year-ago quarter. Net sales improved 14.3 percent to $143 million versus $125.1 million a year earlier. Analysts surveyed by Yahoo expected earnings per share of 25 cents on sales of $151.5 million.
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Comparable-store sales for the quarter slumped 1.6 percent, the company said, as gross margin improved to 38.2 percent of sales versus a year-ago margin of 36 percent.
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According to president and chief executive officer Bob Fisch, merchandise margins were “fueled by improved initial markup through lowered costs of merchandise.”
Additionally, the company was not “overly” promotional, and it also benefited from “utilizing a domestic-based and domestic importer vendor,” giving it “the flexibility and control to maneuver in the current sourcing environment,” he said.
For the six months, the retailer’s net income shot up 46.8 percent to $12.2 million, or 49 cents a diluted share, versus profit of $8.3 million, or 36 cents a share, the prior year. Sales rose 20.4 percent to $280.7 million, from $233.1 million.
The company, which operates more than 600 stores in 44 states, said it is on track to meet its goal of opening 100 stores this year. Rue, which has opened 62 stores so far in 2010, said it anticipates third-quarter EPS in the range of 25 cents to 27 cents, lower than analysts’ estimates of 28 cents a share. For the year, the retailer said it expects EPS of between $1.14 and $1.19 a share. Wall Street projected EPS of $1.18.