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LNT Beats The Street

Don Hogsett -- Home Textiles Today, February 7, 2005

Clifton, N.J. — Breezing past Wall Street expectations, Linens 'n Things reported a fourth-quarter profit, before a one-time accounting charge, of $47 million, modestly ahead of a year-before profit of $46 million.

Pinched by the $2 million charge stemming from the way the retailer accounts for vendor allowances, net income subsided modestly, 2.3 percent, to $45 million.

Still, looked at with or without the accounting charge, earnings per share exceeded Wall Street expectations. Analysts had been expecting a profit of 98 cents per share, but the retailer delivered a profit of $1.03 excluding the accounting charge. And even after taking the hit, the company earned a per-share profit of 99 cents, ahead of the consensus Wall Street forecast.

Helped by stronger same-store sales and continued rapid expansion, sales in the Christmas quarter jumped 11.1 percent, to $875.7 million from $788.3 million during the same period a year ago. The critical gauge of same-store sales improved 2.7 percent.

Cheered by the better than expected earnings performance, Wall Street rewarded the stock, driving it sharply higher in value, up 9.3 percent, or $2.40 a share, to $28.10 from $25.70 on the day the news came out, Wednesday, Feb. 2. Linens stock, traded on the Big Board, has now shot up 31.2 percent from its 52-week low of $21.42.

Some brokerage houses were split on how to read the quarter's results. Wedbush Morgan liked what it saw and upgraded its rating of Linens stock to “buy” from an earlier “hold.” But Jeffries and Co. slapped the stock down to a “hold” from a prior rating of “underperform.”

Linens 'N Things

Qtr. 1/1/05 (x000) 2005 2004 % change
a-Fourth quarter results include a $2 million charge stemming from a change in accounting for the way the company records vendor allowances. Excluding the impact of the charge, operating profits in the fourth quarter rose by 1.6 percent, to $76 million from $74.8 million a year ago; net income rose by 1.9 million to $47 million from $46.1 million; and fully diluted earnings per share rose 1 percent to $1.03 from $1.02.
b-12-month results include a $13.3 million charge stemming from the accounting change. Excluding the impact of the charge, operating profits for the full year rose 1.6 percent, to $123.9 million from $122 million; net income improved by 2.1 percent, to $76.4 million from $74.8 million during the prior-year period; and fully diluted earnings per share were unchanged, at $1.67.
Sales $875,724 $788,313 11.1
Oper. Income 72,880a 74,811 -2.6
Net income 45,003a 46,063 -2.3
Per share (diluted) 0.99a 1.02 -2.9
Average gross margin 39.8% 40.1% --
SG&A expenses 31.4% 30.6% --
12 months
Sales 2,661,469 2,395,272 11.1
Oper. Income (EBIT) 102,432b 121,953 -16.0
Net income 63,142b 74,825 -15.6
Per share (diluted) 1.38b 1.67 -17.4
Average gross margin 40.2% 40.3% --
SG&A expenses 36.3% 35.2% --


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