My, how time flies. Fiscal 2005 is history for clothier New York & Company (NYSE:NWY) -- why, the company has already issued sales reports on Q1 2006. Tomorrow morning's news on Q4 and full-year 2005 results, however, will be all about the past (even if the reaction to that news has more to do with the future.) Let's take a quick look at both.

Wall Street Wisdom:

  • General consensus. Seven analysts track New York. Of these, three rate the stock a buy and four rate it a hold. Not a sell in sight.
  • Revenues. Analysts expect New York to report an 18% year over year rise in sales to $358.2 million. Oopsie. The company already reported its sales -- and they came in light at $351.6 million, a 16% increase.
  • Earnings. Analysts are looking for New York to hit the top of its latest guidance of $0.33 to $0.36 per share for the quarter. That 9% increase might be a bit optimistic, however, in light of the already confirmed "revenue miss."

Margin watch:
Gross margins today are 100 basis points lower than they were 18 months ago. Operating profits, on the other hand, are up 10 bp, and the rolling net margin shows that New York is dropping nearly twice as many pennies to the bottom line per dollar of sales at the top. That's not surprising, though; the July and October quarters both carried significant non-operating expenses that dragged down the net. As those expenses work their way off the left side of the chart, the rolling net margin will continue to bounce back on the right.

Margins %

7/04

10/04

1/05

4/05

7/05

10/05

Gross

33.8

34.5

34.3

34.4

34.2

32.8

Op.

9.1

9.2

9.1

9.5

10.2

9.2

Net

2.7

1.4

1.7

2.5

4.4

5.2

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ending in the named months.

Foolish lookout:
By all accounts, New York had a good fourth quarter, despite missing analyst estimates for sales. The issue we're going to face tomorrow isn't the past, however, but the future. Earlier this month, New York issued new guidance based on a 6% decline in monthly sales (against February of last year) and a 13% slide in comps. This was bad news for two reasons. New York had used "price incentives" (i.e., discounts) to attempt to spur sales in February -- discounts that were sure to hurt margins. New York hoped to make up for that by selling more stuff, albeit for lower profits per unit of stuff sold.

If that didn't work, the company will face the double whammy of lower profits and lower volume in Q1 2006. Thus, at last report, New York expected to earn just half the profits it had previously been counting on. Tomorrow, we'll hope to hear something different -- but don't hold your breath. A shortfall of this magnitude is unlikely to have been repaired in the two weeks since we learned of it.

Fool contributor Rich Smith has no interest, short or long, in New York & Company, which is a Motley Fool Hidden Gems recommendation. Take the newsletter dedicated to small caps that pack a big punch for a 30-day free spin.