On Wednesday of last week, after the closing bell, a trio of retailers reported their quarterly earnings results. The reports raised questions about the state of the American consumer as all three companies slashed their forward looking guidance. Another specialty retail company, Francesca’s Holdings Corp (NASDAQ:FRAN), reported sales that missed Wall Street expectations. That stock was trading down around 9% on Thursday afternoon. Although it would be a mistake to read too much into one quarter’s financial results for the companies, the market was clearly surprised.
Shares of both Ascena Retail Group Inc (NASDAQ:ASNA) and Vera Bradley, Inc. (NASDAQ:VRA) were both trading down sharply on Thursday, with Ascena Retail Group Inc (NASDAQ:ASNA) losing around 9% and Vera Bradley, Inc. (NASDAQ:VRA) shares shedding 8%. The third retailer to cut its outlook, rue21, inc. (NASDAQ:RUE), was unchanged due to a buyout agreement reached with private equity firm Apax Partners in late May. That deal values the company at $1.1 billion, including the assumption of debt.
Is the Market Getting Ahead of Itself?
Although the stock market has been on a tear for most of 2013, volatility has been on the rise in recent days and investors have to wonder if share prices have gotten ahead of themselves. While corporate earnings were strong in the fiscal first-quarter, top-line growth has been stagnant. This could be a warning sign that the ongoing economic recovery is stalling in spite of the Federal Reserve’s massive stimulus programs.i
The results from Ascena Retail Group Inc (NASDAQ:ASNA), Vera Bradley, Inc. (NASDAQ:VRA), and rue21, inc. (NASDAQ:RUE), inc. (NASDAQ:RUE) highlight that the American consumer is still feeling the pain of a sluggish job market, lukewarm economic growth, high prices for food and energy, and the residual effects of the housing crisis. Below, we take a closer look at the most recent earnings reports from these three retailers.
Ascena Misses Earnings and Revenue Estimates; Cuts Full-Year EPS Guidance
For the company’s fiscal third-quarter, the retailer reported adjusted earnings per share of $0.26 versus consensus estimates of $0.30. Although net sales in the period were up 46% to $1.14 billion, this too came in below Wall Street revenue expectations of $1.17 billion.
Ascena Retail Group Inc (NASDAQ:ASNA) also reaffirmed that it was cutting its full-year EPS guidance to a range of $1.10 to $1.15 compared to its earlier outlook calling for earnings of $1.20 to $1.30 per share. The losses in the stock in the wake of the disappointing results have sent Ascena Retail Group Inc (NASDAQ:ASNA) into negative territory for the year, with a loss of around 2% as of Thursday’s close.
Looking farther ahead, there could be an opportunity to buy Ascena Retail Group Inc (NASDAQ:ASNA) shares on a deeper pullback. The company has posted very impressive revenue and earnings growth over the last 5 years and analysts are projecting a better than 25% rise in EPS for fiscal 2014.
Another Bump in the Road For Vera Bradley
This is a company that has been struggling significantly in recent years and has reported a string of earnings disappointments. Although the retailer topped analysts’ profit and sales estimates, it too cut its full-year outlook. Vera Bradley also delivered fiscal Q2 guidance that was below current expectations.
For the first-quarter, the company reported EPS of $0.23 versus consensus estimates of $0.21. Sales were $123 million compared to $117 million last year. This also came in ahead of Wall Street revenue estimates of $121.01 million. Looking ahead, however, Vera Bradley, Inc. (NASDAQ:VRA)‘s guidance was hardly reassuring.
For Q2, the company guided for EPS of $0.31 to $0.33 on revenue of $123 million to $126 million. This is well below current consensus estimates calling for EPS of $0.39 on revenue of $136.20 million for the fiscal second-quarter.
Furthermore, the clothing retailer also slashed its full-year outlook. The company now expects EPS of $1.74 to $1.78 on revenue of $570 million to $575 million. Earlier, Vera Bradley, Inc. (NASDAQ:VRA) had forecast EPS of $1.83 to $1.88 on sales of $585 million to $590 million for fiscal 2014. Not surprisingly, this is well below current consensus calling for earnings of $1.81 per share on revenue of $591.12 million.