Oct 9, 2008
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Clothing chains falter as shoppers clamp down

Oct 9, 2008

By Martinne Geller

NEW YORK (Reuters) - Clothing retailers reported dismal same-store sales results for September as the global financial crisis further squeezed consumers who were already cutting back because of the weak economy.

Abercrombie & Fitch and TJX Cos Inc lowered their earnings outlooks on Thursday, while Chico's FAS Inc withdrew its forecast altogether.

"Our disappointing September sales results reflect the deteriorating macroeconomic environment," Chico's Chief Executive Scott Edmonds said in a statement. "This, combined with the unstable financial markets, has caused us to essentially withdraw our previous earnings outlook for the second half of this year, as predictability of future results is extremely difficult at this time."

The women's clothing retailer reported a 15.6 percent decline in September sales at stores open at least a year, while analysts on average were expecting a drop of 13 percent, according to Thomson Reuters Estimates.

Abercrombie said September same-store sales fell 14 percent, far worse than the 8.1 percent decline expected by analysts.

The teen apparel retailer warned that "absent notable improvement in the macroeconomic environment and a return of consumer confidence," it expected current business trends to continue into the all-important holiday fourth quarter.

Abercrombie forecast earnings per share of 74 cents to 76 cents for its third quarter, which began on August 3, and said it expected net income for the second half of the year to fall "appreciably below" its August outlook of $3.40 to $3.45 per share.

The bad news came a day after a host of other retailers, including Target Corp , Saks Inc and JC Penney Co Inc , reported worse-than-expected sales and lowered their earnings outlooks as they head into the key holiday shopping season.

Out of 30 companies that reported September same-store sales, about 70 percent of them missed analysts' estimates, according to Thomson Reuters data.

Gap Inc reported a worse-than-expected 11 percent decline in September sales, driven by a 24 percent drop at its Old Navy chain. Analysts on average were expecting an 8.3 percent decrease.

Off-price chains Ross Stores Inc and TJX did not fare much better even though they typically offer lower prices than their department store rivals, since they buy excess apparel, accessories and home goods at below-wholesale prices.

TJX, which runs the T.J. Maxx and Marshalls chains, and Ross Stores reported September sales declines, surprising analysts who had been expecting increases.

Ross blamed its decline on Hurricanes Gustav and Ike, Tropical Storm Hanna and unusually warm weather in the western United States.

"We also believe that the recent disruptions in the credit and financial markets have had a negative impact on the consumer," CEO Michael Balmuth said in a statement.

Ross said it was taking a cautious stand on the rest of the year, given the economic uncertainty.

Abercrombie shares were down 6 percent at $30.57 in early New York Stock Exchange trade, while TJX fell 1.5 percent to $27.19.

(Additional reporting by Nicole Maestri, Aarthi Sivaraman and Sarah Coffey)

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