Question: When is keeping up with the latest fashion not so. well, fashionable?
Answer: When you're a department store chain known for catering to the, ahem, older set. May Department Stores
The chain, which operates 491 department stores under such well-known names as Filene's, Kaufmann's, Lord & Taylor and Foley's, today reported a 46% slide in earnings per share for the first quarter. After eliminating restructuring expenses, the decline was only 42%, but at these levels, the difference isn't all that meaningful. Meanwhile, comparable-store sales, the most important performance measure for a retailer, were down 5.1% for the quarter.
Chairman and CEO John Dunham didn't pull any punches when he opined that "first-quarter results did not meet our expectations." The problem lay mainly in May's proprietary apparel brands. The company tried to reach out to younger customers with a more fashion-forward look, but the Abercrombie & Fitch
To its credit, May's upper management responded by marking down the offerings to keep inventories in line, even though that resulted in the large profit shortfall. But store-for-store inventories ended the quarter down by about 4% from last year. Hooray for responsible retail management!
There's no relief on the near-term horizon, though, as the summer apparel lineup looks pretty similar. On the conference call, the company acknowledged that if current sales trends continue -- with the inkling that they probably will -- markdowns in the second quarter are headed for more of the same numbers.
Loyal Fool readers may be asking, "What difference does all this make? Isn't May in the process of being acquired by Federated Department Stores
This has been a solid spring season for department-store retailers, and several of the big players have strutted over much stronger sales compared to the discounters. J.C. Penney
Despite higher energy costs and an uncertain economic outlook, the higher-end consumer appears to be buying. I don't want to get ahead of myself, but this may be a good omen for department stores over the balance of 2005. Unfortunately for May, it looks like a summer fashion makeover might be the next order of business.
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Fool contributor Timothy M. Otte dresses up from his normal jeans and T-shirt only under extreme compulsion. He owns shares of Wal-Mart but none of the other companies mentioned in this article. The Motley Fool has a disclosure policy.