I'll be brief today: I think the reaction to same-store sales results from Hidden Gems selection New York & Co.
Here's the meat of the company's same-store-sales press release:
Richard P. Crystal, Chairman and CEO stated: "We are pleased with our performance for September as sales were up 2.3% on a comparable store basis versus a highly promotional month the prior year. Our offerings resonated well with our customers across key merchandising categories generating significantly higher margins than last year. As a result, we expect third quarter diluted earnings per share to be at the high end of our previously issued earnings guidance range."
Right up front, we see that comparable-store sales were 2.3%, and according to the estimates I can find, expectations were for 3%. That's a disappointment, but not a very large one. The more important part of the paragraph is the portion that mentions significantly higher margins than last year. You don't need to have monster same-store sales if you're increasing margins, and if you can increase both margins and same-store sales, you're doing pretty well.
New York & Co. hasn't exactly been firing on all cylinders like Guess?
Quarter |
Gross Margin |
---|---|
Q2 2006 |
28.5% |
Q1 2006 |
29.6% |
Q4 2005 |
31.8% |
Q3 2005 |
29.3% |
Q2 2005 |
32.2% |
Q1 2005 |
36.4% |
Last year's third quarter saw margins of 29.3%, so I'm going to go out on a limb and assume that by "significantly higher," management means something greater than 30% -- maybe even results akin to the first half of 2005, when things were going well. If I included another table with inventory balances, it would become clear that the company had to discount because it needed to move that inventory, and discounting means lower margins. Trust doesn't come easily when you've had a few bad quarters; however, if the company is starting to get things right going into the most important selling season of the year, I'd consider that a positive development.
For more Foolishness on New York & Co.:
Can't live without more Foolishness in your life? Take one of our newsletters for a free 30-day test-drive. Disagree with Nate on New York & Co? Why not tell him (and more than 8,000 other investors) in the Fool's new stock-rating service, CAPS ?
Nathan Parmelee owns shares in New York & Co., but has no interest in any of the other companies mentioned. The Motley Fool has an ironclad disclosure policy.