LNT slashes first quarter forecasts
April 14, 2003-- Home Textiles Today,
With same-store sales pummeled by bad weather, a weak economy and now a war with Iraq, Linens 'n Things late last week hoisted a yellow flag warning Wall Street and investors that first-quarter profits will come in far short of expectations, falling as much as 60 percent from year-ago levels.
Driven by continued expansion, overall sales for the quarter ended April 5 grew by 5.0 percent, the retailer said, to $480 million from $457 million last year. But the gains were all from new stores opened, and the acid-test gauge of same-store sales fell by 3.2 percent.
Given the drop in same-store sales, the retailer said earnings are now expected to come in at $0.04 to $0.05 a share, down about 60 percent from $0.12 a share in the same period a year ago. Earlier, Linens 'n Things had forecast earnings in the range of $0.10 to $0.12 a share.
Taking a bite out of the bottom line, the retailer said, is the cash settlement paid to former president Steven Silverstein, who left the chain in March after less than two years in that role. Without the cash payout, earnings per share would have totaled $0.07 to $0.08 a share.
Wall Street seemed to shrug off the news, and Linens 'n Things stock actually climbed after the retailer put out the news, rising by $0.19 a share to $19.74, a gain of 0.9 percent.
Norman Axelrod, chairman and ceo, said, sales during the first quarter "were difficult as a result of a series of external factors. Inclement weather significantly impacted sales in February, particularly during President's Day weekend, while the economy, weak consumer confidence and the official start of war in Iraq have continued to depress consumer traffic."
As if that weren't enough, the calendar is also working against the retailer, said Axelrod, with a late Easter pushing holiday shopping into the second quarter and draining sales out of the first quarter.
"Although the retail environment remains challenging, we are committed to those initiatives that are aimed at improving our guest shopping experience," Axelrod emphasized. "These initiatives are on track and remain a priority for 2003."
Average gross margin is expected to remain strong during the first quarter, Axelrod said. But operating costs are expected to climb, when measured as a percentage of sales, since sales are seasonally lower during the period, and now are further exacerbated by lower same-store sales.
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