Gordmans cuts forecast on slowing sales; shares plunge

Mon Oct 1, 2012 10:51am EDT

Related Topics

(Reuters) - Discount retailer Gordmans Stores Inc (GMAN.O) could miss analysts' profit estimates for the first time since it went public in 2010 as slowing sales forced the company to cut its current-quarter outlook.

Shares of the company, which sells products at up to 60 percent below department store prices, fell 25 percent to $13.75, their lowest in six months.

Discount retailers, which offer lower prices to customers looking for a better bargain in a weak economy, are facing a crunch as full-price retailers also resort to a similar model.

"The company remains challenged to increase comparable-store sales as the target customer remains challenged by a difficult economy," analysts at Stifel Nicolaus headed by Richard Jaffe wrote in a client note.

The brokerage, however, kept its "buy" rating and a target price of $24 on the stock.

Gordmans said comparable store sales trends have slowed since Labor Day and third-quarter comparable sales through September 29, 2012 fell 2.1 percent.

The company expects to earn between 18 cents and 20 cents per share in the third quarter, down from its previous guidance of 24 to 26 cents.

It expects revenue to be between $142 million and $144 million, compared with its prior guidance of $145-$147 million.

Analysts on average had expected earnings of 26 cents per share on revenue of $146.6 for the current quarter, according to Thomson Reuters I/B/E/S.

The company also cut it forecast for the fourth quarter and expects a profit of 58 to 61 cents per share on revenue of $213-$215 million.

Analysts were expecting it to earn 64 cents per share on revenue of $217.8 million for the fourth quarter.

The stock was down 25 percent at $13.83 in morning trade, making it the top percentage loser on the Nasdaq on Monday.

(Reporting by Arpita Mukherjee in Bangalore; Editing by Saumyadeb Chakrabarty)

FILED UNDER: