Liz Claiborne disappoints, Macy's outlook weak

NEW YORK (Reuters) - Liz Claiborne Inc (LIZ.N) posted a quarterly loss much wider than anticipated and Macy's Inc (M.N) said it still expects sales to fall this year as shoppers continue to clamp down on spending.

The news, along with a government report showing sales at U.S. retailers fell for a second straight month in April, dulled hopes for a retail rebound this year and emphasized that consumers are keeping a tight rein on spending, shopping only for essentials.

"We see the environment as still fundamentally promotional, with a reserved consumer and significantly reduced traffic," Liz Claiborne Chief Executive William McComb said during a conference call. But he added that the economic situation was not getting any worse.

Retail stocks fell, with the Dow Jones Retail Index .DJUSRT down 2.56 percent. Liz Claiborne shares fell nearly 20 percent, while Macy's fell 4.5 percent.

The U.S. Commerce Department said total retail sales fell 0.4 percent in April after declining 1.3 percent in March. Economists had expected April sales to be flat.

"When you start to look at the broader market ... that is effectively down, it is going to be difficult for a stock like Macy's, (which) is pretty reliant on a good market in general, to buck that trend," said Edward Jones analyst Matt Arnold.

One bright spot came from AnnTaylor Stores Corp (ANN.N), which said it should report a smaller first-quarter loss than Wall Street expects, even though consumers continue to cut back on spending. The retailer said it is being helped by improved gross margins and cost-cutting. Its shares rose more than 13 percent before paring most of those gains.

Department store chains, from mid-priced Macy's and rival J.C. Penney Co Inc (JCP.N) to upscale Saks Inc (SKS.N) and Nordstrom Inc (JWN.N), have taken one of the hardest blows in the recession as U.S. consumers steadfastly stick to shopping lists, spending only on essential items like food or medicine.

Retailers have slashed prices to try to clear inventory.

Macy's said it was prudent to leave its full-year forecast unchanged, given the economic uncertainty. It had previously forecast earnings of 40 cents to 55 cents a share, excluding consolidation costs, on a same-store sales decline of 6 percent to 8 percent.

Macy's, which also operates the Bloomingdale's stores, sells a range of merchandise from furniture and kitchen appliances to jewelry and clothes -- items that shoppers are shying away from in the recession.

"It's arguably going to take some time for their customer to feel comfortable enough to spend meaningfully on the discretionary items they sell," Arnold said. "People will have to be patient to truly see sales come back."

Macy's CFO Karen Hoguet said sales trends in the second quarter should be similar to those of the first quarter.

LOSSES WIDEN

Macy's posted a net loss for the fiscal first quarter that ended May 2 of $88 million, or 21 cents per share, almost 50 percent wider than the loss posted a year earlier.

Excluding restructuring costs, its loss of 16 cents a share was smaller than analysts' average forecast for a loss of 20 cents, according to Reuters Estimates.

Sales fell 9.5 percent to nearly $5.2 billion, with sales at stores open at least one year, or same-store sales, falling 9 percent. Last week, Macy's posted a 9.1 percent decline in April same-store sales.

Macy's has taken steps to offset the sales pressure that has dogged it for months. The company slashed its dividend and cut 7,000 jobs earlier this year.

It has also put merchandise tailored to individual markets on store shelves. The company expects to see an improvement in sales in the fourth quarter due to the initiative, and particularly in the spring of 2010. It forecast annual cost savings of $400 million starting in 2010, and $250 million in part of 2009.

Liz Claiborne posted a loss of 37 cents a share, excluding one-time items, for the first quarter that ended April 4, much worse than analysts' average forecast for a loss of 22 cents. Sales fell nearly 29 percent to $779.7 million.

Liz Claiborne forecast an operating loss on an adjusted basis for the second quarter, saying sales and loss would look similar to its first-quarter results.

Macy's shares were down 4.5 percent at $11.79 and Liz Claiborne fell 19.7 percent to $4.64 in afternoon trade on the New York Stock Exchange. AnnTaylor rose 0.6 percent to $7.28.

(Reporting by Aarthi Sivaraman in New York, Brad Dorfman in Chicago and Nicole Maestri in San Francisco, editing by Dave Zimmerman and John Wallace)