These Retailers Continue to Confuse Investors

On Thursday, the Labor Department announced that initial claims for state unemployment decreased 12,000 to a seasonally adjusted 367,000.  However, nearly 24 million Americans still remain out of work or underemployed.  As a result, retailers continue to report mixed results as many Americans remain cautious amid a sluggish economy.

Shares of Abercrombie & Fitch (NYSE:ANF) plummeted more than 12 percent after reporting lower-than-expected sales in the United States.  Sales in the U.S. increased only 4 percent, compared to a 62 percent surge internationally.  The clothing retailer also relied on heavy discounting in order to attract cash-strapped Americans.  Chairman and CEO Mike Jeffries said the company’s sales “were below below expectations in a highly promotional environment, and our results were further affected by all-time high cotton costs.”

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Macy’s Inc. (NYSE:M) and Nordstrom, Inc. (NYSE:JWN) also reported disappointing results.  Macy’s announced that sales at stores open at least 12 months increased 2.4 percent, short of the 3.5 percent estimate by Reuters.  Meanwhile, Nordstrom expected to see an increase of 5.3 percent in same store sales, but only reported a 5 percent increase.  “Sales in January, the smallest-volume month of the year, were weaker than anticipated,” said Terry J. Lundgren, chairman, president and chief executive of Macy’s, in a statement.

With 20 major stores reporting results by Thursday morning, Reuters reports that about 60 percent did manage to beat analyst estimates.  Companies such as Costco (NASDAQ:COST), Target (NYSE:TGT) and Kohl’s (NYSE:KSS) all reported higher-than-expected same store sales for January.  Shares of Gap Inc. (NYSE:GPS), the biggest apparel retailer in the U.S., surged 9 percent after reporting better-than-expected results.  However, the results were still lackluster.  Same store sales for Gap decreased 4 percent in January, compared to expectations of a 4.9 percent decrease.  Collins Stewart, a leading independent financial advisory group, recommends selling Gap on today’s strength, and rates the company as a Sell with a price target of $17.  Limited Brands (NYSE:LTD) and Zumiez Inc. (NASDAQ:ZUMZ) also beat same store estimates.

While many analysts expect retail numbers to improve in the following months, investors  still have good reasons to question the bullish sentiment.  In January, the number of planned layoffs at U.S. companies climbed to its highest level in four months.  Reuters reports, “Employers announced 53,486 planned job cuts last month, up 28 percent from 41,785 in December.”  Due to store closings and cost-cutting measures, retailers cut 12,426 jobs in January, the largest for the sector in two years.

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To contact the reporter on this story: Eric McWhinnie at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com