LNT drops earnings outlook
July 19, 2004,
Sounding alarm bells on a jittery Wall Street, and triggering a 6 percent slide in its stock price, superstore retailer Linens 'n Things hoisted a caution flag last week, warning that a May slump in sales will take its toll on the bottom line, driving earnings sharply lower than expected.
A rattled Wall Street responded by punishing the retailer's stock, driving it down by 6.4 percent, or $1.76 per share, to a level of $25.60 in unusually heavy trading on July 14, the day after the company put out the revised outlook.
Norman Axelrod, chairman and CEO, blamed the projected shortfall on weak May sales. "Overall, our second-quarter results were primarily attributable to a decline in guest traffic, particularly in May."
And while margins are holding steady, costs are rising during the quarter, said Axelrod. "Although we expect our gross margins for the quarter to remain consistent with the prior year, we were not able to leverage our expense structure during this seasonally lower-volume quarter."
Linens 'n Things said it expects to report second-quarter sales and profits on July 21. In the meantime, it did release sales figures for the period, showing sales climbing by 10.5 percent, to $578.7 million from $523.7 million during the same period a year ago. Same-store sales were virtually flat, edging up just 0.2 percent.
That's modestly off the pace of the prior year's second quarter, when overall sales rose by 13.4 percent, and same-store sales rose by 0.1 percent.
Despite the weaker-than-expected second quarter, Axelrod said he still expects the company will hit its earnings target for all of 2004. "We believe we have the initiatives in place to achieve our annual earnings per share target of $1.83 to $1.93," excluding one-time items.
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