Many retailers that cater to older women have been having a difficult time lately. Unfortunately for their shareholders, Ann Taylor (NYSE: ANN ) and Talbots (NYSE: TLB ) don't seem to be turning the tide quite yet.
Tough times ahead
Ann Taylor's first-quarter net income decreased 17.7% to $25.9 million, or $0.43 per share, including restructuring and asset impairment charges of $3.7 million, or $0.04 per share. Total revenue increased 2% to $591.7 million, and same-store sales decreased 4.3%.
Not surprisingly, Ann Taylor, like many retailers, is struggling with a weak consumer climate that it described as "highly promotional." (I'll say: In a bit of anecdotal observation, I scored a pair of slacks at Ann Taylor Loft that were marked down from $90 to $24. That worked out for my wallet, but such super specials aren't so good for a company's profits.)
The retailer said it expects earnings of $0.42 per share to $0.47 per share in the second quarter, and the outlook reflects continued "volatility" related to the difficult macroeconomic and consumer environment.
For all of 2008, Ann Taylor said to expect earnings of $1.80 to $1.90 per share, excluding restructuring costs.
Talbots tries and tries again
Speaking of volatility ... Maybe you've noticed Talbots stock's roller-coaster ride from about March on. That's not my idea of fun thrills and chills; I've been bearish on the stock for quite some time, and in April it made my list of retail stocks not to buy.
Talbots' first-quarter net income dropped 69% to $1.6 million, or $0.03 per share, including the effects of restructuring charges the company had revealed earlier this year. Revenue dropped 5.4% to $524.4 million.
The retailer's same-store sales continued to flag, too, dropping 9.8%. The crazy 20.2% drop in comps for the J. Jill concept makes the 7.4% comps decrease for the core Talbots brand sound minor. Ouch.
Talbots emphasized inventory management and expense control in its press release, and continues to work on improving its brands. And for anybody who got spooked back in April about how Bank of America (NYSE: BAC ) and HSBC had pulled Talbots' lines of credit (a good thing to get spooked about, I'd say), Talbots did say it's still talking to financial institutions about increasing its working capital line of credit.
A difficult niche
Many investors seem to go from wildly optimistic to terribly pessimistic about Talbots. I'm in the pessimist camp. Talbots has a lot of work ahead, and even though it knows it needs to get its brands in better standing for shoppers, I see few signs of progress.
I don't feel too bullish on Ann Taylor either. It's trading at 14 times earnings, which sounds like a pricey multiple for a company I'm not entirely convinced will be among the big winners in this tough economy.
If you follow this retail niche, you probably know many retailers that target mature female shoppers -- including Coldwater Creek (Nasdaq: CWTR ) and Chico's (NYSE: CHS ) -- seem to have missed the boat when it comes to providing the merchandise that these women require.
Plus -- and if you've heard me spout on about this before, I apologize -- more mature female shoppers are probably more likely to be very careful how they spend their money in this economy. They are not your footloose-and-fancy-free teen shoppers. These consumers are far more likely to open their pocketbooks only if the merchandise is right (and now, probably only if the price is right, too).
That's why I'd need to see major signs of strength to be tempted to buy shares in any retailers mentioned in this article, especially with things as they are with the economy. So far, I only see stocks that are even riskier than usual at the moment. I know there are retail bargains for the long haul out there. But these stocks aren't among them.