NEW YORK — A batch of specialty retailers posted mostly disappointing fourth-quarter and full-year earnings results on Wednesday, while also saying results would be affected by changes to lease accounting.
Hot Topic Inc. said fourth-quarter profits fell 22.6 percent to $17.4 million, or 38 cents a diluted share, but still matched analysts’ estimates. Total sales rose 8.8 percent to $211.3 million, with comps down 6 percent.
“Women’s fashion tops continued to experience double-digit increases. However, the lack of key items to drive women’s bottoms, coupled with trend and execution issues in women’s novelty Ts resulted in a double-digit decrease in these categories,” said Jim McGinty, chief financial officer of Hot Topic, on a conference call with investors and analysts.
In full-year 2004, the City of Industry, Calif.-based company earned $39.7 million, or 83 cents. Annual sales totaled $656.5 million, up 14.8 percent, while comps fell 2.9 percent.
Off-price retailer Ross Stores Inc. said earnings in the quarter ended Jan. 29 declined 30.7 percent to $49.4 million, or 33 cents a share, hurt by higher markdowns and ongoing information technology-related issues.
Pleasanton, Calif.-based Ross Stores said in a statement that the latest quarter’s earnings included a charge of 2 cents from changes in the way it accounts for store operating leases, an issue clarified by the Securities and Exchange Commission in early February. Through 2002, the company expects to record a noncash charge totaling 5 cents in related financial restatements.
Excluding the 2 cent charge, Ross Stores would have earned 35 cents in the latest fourth quarter, ahead of analysts’ consensus for 34 cents.
Total quarterly sales were $1.2 billion, up 10.3 percent, while same-store sales were flat on a year-over-year basis. Annual earnings dropped 25.3 percent to $168.5 million, or $1.12. Total revenues were $4.2 billion, an increase of 8.1 percent, while same-store sales were down 1 percent.
At Charming Shoppes Inc., a women’s plus-size apparel retailer, fourth-quarter profits plunged 45.4 percent in the 13 weeks ended Jan. 29 to $5.5 million, or 5 cents a share. Analysts had been expecting a profit of 6 cents. Total sales rose 0.1 percent to $586.1 million, while consolidated same-store sales decreased 2 percent.
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In the year, Charming Shoppes posted a profit increase of 65.5 percent to $67.2 million, or 54 cents a share. Results in 2004 missed analysts’ expectation for 55 cents, however.
Charming Shoppes said it plans to restate financial results for the just-completed year, which will reduce earnings by 2 to 3 cents, due to the SEC’s clarification on leasehold accounting. The company said it also will restate results for the prior two years, which it expects should negatively impact earnings by no more than 3 cents a year.
Revenues for the year at the Bensalem, Pa.-based firm were $2.33 billion, up 2 percent, as consolidated comps rose 1 percent.
Looking to the first quarter, Charming Shoppes expects to earn 22 to 23 cents a share, assuming total sales of $600 million and comp-store sales that increase slightly. Wall Street analysts are calling for 22 cents.
And Knoxville, Tenn.-based Goody’s Family Clothing reported that fourth-quarter earnings rose 1.9 percent to $7.1 million, or 21 cents a share, easily beating analysts’ estimates for a profit of 16 cents. Total quarterly sales increased 4.2 percent to $384.7 million, while same-stores sales fell 0.4 percent.
Goody’s noted that it, too, will be restating financial results for the year ended Jan. 31 to correct accounting for rent expenses. Unlike many other retailers, the company’s restatement will add to net earnings in fiscal 2002 and 2003, but will result in an aftertax charge to retained earnings in fiscal 2002.
In fiscal 2004, Goody’s earnings dropped 11.7 percent to $15.7 million, or 46 cents a diluted share. Annual sales totaled $1.27 billion, up 3.3 percent.