Retailers cut outlooks as consumer spending slows
LOS ANGELES (Reuters) - Retailers Men's Wearhouse (MW.N), American Eagle Outfitters Inc (AEO.N) and PetSmart Inc (PETM.O) cut profit forecasts on Wednesday after a wave of weak sales reports.
Large and small U.S. retailers have reported signs of cautious spending by consumers, who are feeling the pain of higher food and gasoline prices as the housing market decelerates after buoying consumer confidence and spending for years.
Shares in Houston-based Men's Wearhouse fell 4.6 percent in extended trade after the company cut its third-quarter per-share earnings estimate to a range of 66 cents to 70 cents from its previous forecast calling for earnings of 70 cents to 73 cents per share.
The retailer, which specializes in men's work and formal wear, said light customer traffic at its K&G Superstore outlets contributed to weak same-store sales. It also linked the integration of its recently acquired After Hours chain to lower tuxedo rental unit volume.
Teen and young adult retailer American Eagle posted a 2 percent decline in September same-store sales on Wednesday, prompting the retailer to cut its third-quarter earnings outlook.
American Eagle blamed unusually warm weather, particularly in the mid-Atlantic region, for lower store traffic.
The company now expects to earn 44 cents to 45 cents per share in the third quarter, down from its prior forecast of 47 cents to 48 cents per share.
Earlier in the day, a Piper Jaffray & Co survey showed that while teenagers' spending is unchanged from a year ago, parents have pulled back on purchases for their children.
"Broadly, there is worry about consumer spending. The weather on the East Coast certainly did not help," said Needham & Co analyst Christine Chen, who covers American Eagle.
Stifel, Nicolaus & Co analyst Richard Jaffe said weather is particularly important at the change of season. He added that men's tailored clothing is the most economically sensitive apparel sector.
"The guy who takes the hit first is dad, and the last to have his spending budget restored is dad," said Jaffe, who covers Men's Wearhouse and American Eagle.
Even Fido hasn't escaped the belt-tightening.
Petsmart Chief Executive Philip Francis said weak consumer spending, along with unusually warm weather that hurt sales in key cold-weather categories, would cut into business.
The seller of pet products cut its third-quarter and 2007 profit forecasts.
Petsmart lowered its earnings target to 17 cents to 20 cents a share from 21 cents to 23 cents per share previously. It now sees full-year earnings of $2.02 to $2.07 per share, versus its prior call for per-share earnings of $2.08 to Continued...
