Will Rising Costs and a Weak Consumer Spell Trouble for these Retailers?

In the third quarter, the biggest contributor to the 2.5% annualized GDP increase was Personal Consumption.  Consumers continue to dip into their savings in order to go shopping.  The savings rate in June hit a 2011 high of 5.3%, but fell to 3.6% in September.  This is the lowest savings rate since December 2007.  With the consumer under more financial stress than ever, let’s take a look at how it is effecting these big name retailers.

Shares of Macy’s (NYSE:M) are fairing better than Maidenform (NYSE:MFB), but still fell more than 5% after reporting downgrading its outlook for the fourth quarter. (Dig Deeper: Macy’s Inc. Earnings Cheat Sheet.) The retailer predicts fourth quarter earnings of $1.52 to $1.57 per share, while analysts surveyed by Thomson Reuters expected $1.66.  More shoppers are turning to the computer in order to compare prices and save on driving costs.  Macy’s reported a 40% surge in online sales for the third quarter.

Ralph Lauren Corporation (NYSE:RL) shares are also seeing a slide greater than 5% today.  Net income for the clothing company rose 13.5% to $233 million ($2.46 per share), compared to $205.2 million ($2.09 per share) last year.  However, the market is concerned about shrinking margins.  Gross margin decreased 1.4 percentage points to 56.5%. The contraction appeared to be driven by increased costs, which jumped 28.2% from the year earlier quarter while revenue only increased 24%.

As the chart above shows, Liz Claiborne Inc. (NYSE:LIZ) has outperformed the other retailers in the past six months.  Shares fell 3% on Wednesday after reporting a third quarter loss of $214.6 million ($2.27 per share), compared to a loss of $62.7 million (67 cents per share) last year.  Gross profit margins at the company increased to 53.7% from 50% last year, due to licensing its namesake brand to JC Penny (NYSE:JCP).

Maidenform Brands (NYSE:MFB) designs, sources, and markets a range of intimate apparel products for women in the US and internationally.  On Wednesday morning, the company announced third quarter net income declined 20% to $10.2 million (44 cents per share), compared to $12.8 million (55 cents per share) last year. CEO Maurice S. Reznik explained,  “While we increased sales and market share in the third quarter, we are disappointed with our earnings performance, which was below our expectations. The quarter was impacted by several factors, including a decline in consumer traffic in our category, that suppressed sales and drove higher costs to promote and liquidate overstocks.”  Shares fell more than 25% on the news, and reached a new 52-week low.

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Performing better than most today, shares of Pier 1 Imports (NYSE:PIR) are down 1.15% after giving a positive outlook for the third quarter.  The company expects earnings of at least 18 cents per share, compared to analyst estimates of 17 cents per share.  In April, Pier 1 announced a $200 million growth plan to recapture the interest of consumers.  CEO Alex Smith stated, “We are excited that the three-year plan includes moving up the timetable for e-Commerce and we expect to be selling online in early summer of 2012. In stores, our investments will include a rollout of new fixtures, lighting upgrades, and other enhancements to provide a great in-store shopping experience for our customers and increase sales productivity.”  Shares are up 22% year-to-date, and reached a new 52-week high on Tuesday.