Plus-sized retail chain loses big

May 21, 2008 7:11:57 PM PDT
The usually reliable plus-size shopper stayed away in the spring, leading apparel retailer Charming Shoppes Inc. to report a first-quarter loss on Wednesday after posting the worst sales drop in established stores in at least four years. The parent of Lane Bryant, Fashion Bug and Catherines stores said it marked the first such shift it had seen in years. Since plus-size women typically don't have that many choices when it comes to clothes shopping, they usually can be counted on even in a weak economy.

This time, though, it was different. The retailer said less-affluent plus-size customers were feeling the pinch more than usual.

"These consumers in their socio-economic positions are feeling the brunt in a much greater degree than what is happening to other Americans," Chief Executive Dorrit Bern said in a conference call with analysts. "We will just have to ride it out."

Shares of Charming Shoppes fell nearly 5 percent, or 27 cents, to $5.37 on Wednesday.

March's performance was particularly poor, driving a 13 percent drop in sales at stores open at least a year - a key metric of retailer performance. It was the worst showing since 2004. Broken out by chain, these sales fell 12 percent each at plus-size store Lane Bryant and Fashion Bug, and 16 percent at Catherines stores.

Charming Shoppes said core casual seasonal apparel such as knits and capris, as opposed to trendy items, did poorly in the quarter.

The quarter had double-digit percentage decreases in customer traffic across the chains.

The Bensalem-based retailer posted a loss of $34.46 million in the quarter, or 30 cents per share, compared with a profit of $26.3 million, or 20 cents, in the same period a year ago.

First-quarter results included after-tax charges of $2.2 million, or 2 cents per share, related to company consolidation and streamlining of operations. It also included a $2.4 million charge, or 2 cents per share, for advisory and legal fees related to a proxy fight that was settled on May 8.

Excluding these items, Charming Shoppes would have had a $657,000 profit, or a penny per share, for continuing operations.

Net sales fell 8 percent to $641.3 million in the quarter.

Analysts polled by Thomson Financial expected a loss of 6 cents per share in the quarter, on sales of $725.2 million.

"We see the company continuing to be challenged" by the macroeconomic environment and competitors, wrote Banc of America Securities analyst Dana Cohen.

Looking ahead, the retailer expects to post second-quarter earnings that range from breaking even to a loss of 2 cents per share on sales of $625 million to $640 million for continuing operations.

Analysts were expecting a 4-cent per share profit and sales of $735.6 million.

Charming Shoppes also said its non-core misses apparel catalog business is in the process of being sold and the deal could close over the next few months.