October 29, 2001-- Home Textiles Today,
ShopKo downgrades 3Q earnings outlook
ShopKo, Green Bay, WI, updated an earlier earnings outlook for the third quarter, saying it now expects to post a loss of 15 cents to 20 cents per share with sharply eroding margins more than offsetting savings generated by aggressive cost-cutting.
Earlier, ShopKo cautioned that an improvement in the overall economy was necessary to support earnings targets for the second half of the year. But in its update, the retailer said, "Given the continued challenging retail environment, coupled with the tragic events of Sept. 11, the company now believes economic improvement is unlikely for the remainder of the year."
The retailer said it will discuss the fourth-quarter outlook and provide an update on third-quarter performance during a conference call scheduled for Nov. 15.
In an overview of operations, ShopKo said August same-store sales were better than expected, but September same-store sells came in lower than expected. Gross margin rates were pressured in both months, the company said. October results have shown improvement over last year, but margins remain under pressure, the company added. Adjusting sales and margin targets, ShopKo said it expects same-store sales growth for all of October in the range of 4 percent to 6 percent. Hacking away at stockpiles, the retailer said inventory is expected to decline to the mid single digits from year-ago levels.
Weighing its cash position, ShopKo said it has "availability in excess of $150 million under its credit facility and expects to maintain more than adequate liquidity through the balance of the year."
Existing home sales decline by 12% in September
Sales of existing homes plunged by almost 12 percent in September, chilled by a faltering economy and terrorist attacks, the National Association of Realtors (NAR) reported.
September sales fell by 11.7 percent, to a seasonally adjusted annual pace of 4.89 million, down from a revised August rate of 5.54 million units. It was the largest drop in sales of existing homes since April 1995, when sales tumbled by 12.5 percent.
David Lereah, NAR chief economist, said the drop was not unexpected, given the recent terrorist attacks. "Considering the nation essentially came to a halt during the week of the attack, we knew there would be a hit on home sales activity," he said. "However, our in-house tracking of major brokers across the country shows sales activity making some recovery, which demonstrates that the underlying demand and fundamentals of the market remain strong."
Hardest hit was the Northeast, where sales fell by 14.5 percent. Sales were off by 12.2 percent in the West and fell 11.5 percent in the South. The Midwest recorded the smallest decline, 9.2 percent.
Dollar General granted waiver extensions
Dollar General, the Goodlettsville, TN-based discount retailer, which is probing accounting irregularities and restating results for the past three years, said its bank lenders have granted it further waiver extensions under its outstanding financing pacts.
The retailer said the extensions give it more time to complete its audited financial statements for fiscal 2000 and its restated financial results for 1998 and 1999. Lenders gave the retailer until Dec. 31 to complete the probe and audits.
The company added, though, that there can be "no guarantee" that it will be able to complete the audited statements by that date or that it will be able to obtain additional extensions from lenders.
Last month, Dollar General, which operates 5,300 small, neighborhood stores, fired its independent auditor, DeLoitte & Touche.
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