It is tough to be a retailer in this climate. It's especially tough to be a retailer like J. Crew Group, Inc. (NYSE: JCG). After all, if you're a Wal-Mart Stores, Inc. (NYSE: WMT) or a Family Dollar Stores (NYSE: FDO), at least you can entice consumers with your low prices, and at least you stock things that people need. Not so with J. Crew. It's a fashion retailer that you don't have to visit during the recession. Apparently, many people indeed haven't been visiting lately. That's why shareholders will most likely be nervous when fourth-quarter numbers are issued after the bell on Tuesday, March 10.
According to this source, J. Crew should report an earnings loss of $0.27 per share. How ugly! This compares to a profit of $0.41 per share in the year-ago period. I expect to hear the same stuff that we've been hearing from retailers such as Urban Outfitters (NASDAQ: URBN) and Kohl's (NYSE: KSS): things are tough, the rest of the year is going to be a huge challenge, we're doing everything we can to navigate the business through the treacherous times, etc. Such rhetoric probably won't be comforting to shareholders, especially considering that J. Crew's stock isn't too far from a 52-week low.
I imagine that the gross margin won't be great, that the company will be taking a conservative stance on guidance, and that markdowns will be a driving factor in terms of the loss (oh, and comps will most likely be down since the holiday quarter was tough on everyone). In other words, I imagine that J. Crew is doing all it can to defend itself against the claws of the recession, but that it won't be enough. Management is simply going to have to wait for things to get better. Plus, according to this item, inventories will need to be addressed.
I think J. Crew would be a risky bet ahead of its earnings report. Now is not the time to gamble on an earnings trade. It will be interesting to see if management offers any insight in terms of new marketing plans and cost-cutting initiatives. No matter what, though, I think that being a bull on this retailer takes guts, the kind I definitely don't possess at the moment...
Disclosure: I don't own any company mentioned; positions can change without notice.
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Reader Comments (Page 1 of 1)
3-09-2009 @ 5:25PM
animationchick said...
J.Crew is in the same boat as everyone else right now. We just have to stay positive and keep our sense of humor! This one always gives me a chuckle http://beema.wordpress.com/2009/03/09/beemanews_09mar09/
3-10-2009 @ 5:57AM
Chris said...
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