Retail & Apparel Earnings Dominate Next Week (SKS, BJ, GYMB, ANN, DKS, FL, GPS, SHLD, PLCE, WTSLA, ZUMZ)

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It seems that earnings season is winding down, but next week we have many of the key retail and apparel players reporting earnings.  Saks Incorporated (NASDAQ: SKS), BJ’s Wholesale Club Inc. (NYSE: BJ), Gymboree Corp. (NASDAQ: GYMB), and Ann Taylor Stores Corp. (NYSE: ANN) are all reporting next week.  Next Thursday may feel like a retail and apparel earnings bonanza as we have Dick’s Sporting Goods Inc. (NYSE: DKS), Foot Locker Inc. (NYSE: FL), Gap Inc. (NYSE: GPS), Sears Holdings Corporation (NASDAQ: SHLD), The Children’s Place Retail Stores, Inc. (NASDAQ: PLCE), Wet Seal Inc. (NASDAQ: WTSLA), and Zumiez, Inc. (NASDAQ: ZUMZ) all reporting earnings in one day.

We have provided estimates from Thomson Reuters, recent sale store sales data, share performance, and added color on what else to consider where applicable.

Saks Incorporated (NASDAQ: SKS) reports on Tuesday.  This is still deemed the troubled and challenged of the higher-end retailers, and it is after the sell-off seen so far in Nordstrom.  Earnings are expected to be -$0.12 EPS and $621.95 million in revenues.  The problem is that analysts still see a loss for the ever-important Q4 period of -$0.04 EPS and $792.7 million in revenues.  Investors are not exactly keen on retail plays that lose money in the holiday quarter.  That being said, it may take a “we should be profitable in Q4” statement to garner much excitement.  Another issue is that Saks is expected to lose money not just for fiscal Jan-2010 but also for Jan-2011.  The good news is that Carlos Slim invested in it and it recently showed October same-store sales were up 0.7%.  At $6.00+ today, its 52-week range is $1.50 to $7.45.

BJ’s Wholesale Club Inc. (NYSE: BJ) is on deck next Wednesday, and we have already seen Wal-Mart and Costco data.  Estimates for the big box-club retailer are $0.45 EPS and $2.48 billion.  For the Q4 period the estimates are $0.97 EPS on $2.76 billion in revenues.  A significant problem for many investors is that BJ’s stock has been range-bound for some time despite some gains it has made.  The company’s same-store sales were -1.1%, but that included gasoline. At $36.50, the 52-week trading range is $27.26 to $40.77.

Gymboree Corp. (NASDAQ: GYMB) is also on deck for earnings on Wednesday.  The special situation and turnaround kid’s retail destination is 20% off of a recent 52-week high, but is still up about 200% from its 52-week low.  Earnings estimates are $1.10 EPS and $270.8 million in revenues.  For the holiday quarter those estimates are $1.12 EPS and $302.2 million in revenues.  While this is not quantifiable without seeing it, the notion that this is for kids does put its swine flu risks higher than most companies elsewhere in the retail stocks reporting next week.  Same-store sales were also down 4% for October.

Dick’s Sporting Goods Inc. (NYSE: DKS) is on deck next Thursday, Nov. 19.  Estimates are $0.08 EPS and $957.6 million; estimates for the holiday quarter are $0.56 EPS and $1.26 billion in revenues.  With shares at $24.00, its 52-week trading range is $9.21 to $26.00.  A look at forward annual earnings estimates of $1.11 EPS for Jan-2010 and $1.26 for Jan-2011 will bring up some of the same valuation concerns we have seen elsewhere in retail.

Foot Locker Inc. (NYSE: FL) is reporting next Thursday and estimates are $0.13 EPS on $1.19 billion in revenues.  For the holiday quarter ahead estimates are $0.28 EPS and $1.29 billion in revenues.  The stock is probably not overly expensive at $10.80 at 17.7-times the $0.61 EPS target for FY Jan-2010 and 14.5-times the $0.74 EPS target for FY Jan-2011.  They are not exactly cheap either.  The 52-week trading range is $3.65 to $12.95.

Gap Inc. (NYSE: GPS) is also on deck next Thursday.  The new CEO has really gotten this longstanding turnaround candidate turned around and heading in the right direction.  We are not even calling Old Navy by the name of ‘Old Lamie’ any longer.  Estimates are $0.44 EPS and $3.57 billion in revenues.  Next quarter estimates are $0.43 EPS and $4.15 billion in revenues die to higher inventory costs.  The CEO deserves praise, but the question here is one of how to value Gap shares.  It is mature and no longer the great growth story.  Estimates are $1.50 EPS for FY Jan-2010 and $1.65 EPS for FY Jan-2011.  With a $22.20 price, Gap trades at 14.8-times this year’s earnings and trades at 13.5-times next year’s expected earnings.  That is not expensive in the current climate, particularly when you consider that it has provided an upside surprise for each of the last four quarters.  We don’t expect it to come any time soon, but we have always had Gap as a break-up candidate where it could break the three major brands apart.  October same-store sales rose by 4% and the total sales rose 5% led by gains at Banana Republic and Old Navy, and dragged by Gap.

Sears Holdings Corporation (NASDAQ: SHLD) is due next Thursday from Eddie Lampert and friends.  The shares are up massively, yet Eddie’s minions at the retail giant keep showing dull earnings.  Estimates are for another loss at -$1.09 EPS on $9.89 billion in revenues.  For the ever-important holiday quarter the estimates are $2.64 EPS and $12.6 billion in revenues.  This has a huge premium at over 70-times this year’s expected earnings of $0.85 EPS and about 50-times FY Jan-2011 estimates.  The premium is because there is a huge asset play here for Lampert’s real estate under the stores.  Investors are probably betting that Lampert traded well in investments too.  So the traditional P/E ratio here doesn’t matter.  At $72.40, the 52-week trading range is $26.80 to $79.35.  Sears has a history of very spotty earnings, yet shares are up significantly from lows and went well above our “stocks to double” price target.

The Children’s Place Retail Stores, Inc. (NASDAQ: PLCE) is also on deck next Thursday.  We had a severe discrepancy in estimates here when we were looking them up, so we are not going to provide that data on this stock.  Sorry.  We recently saw October sales metrics down 2%, but online sales were up 36% in October.  Again, the unquantifiable risk here is what happens in flu season because of the kid factor.  With shares around $35.00, and the 52-week trading range is $16.45 to $37.68.

Wet Seal Inc. (NASDAQ: WTSLA) is on deck as a young women’s apparel retailer.  Normally, we might not cover this one, but it is a retailer that has been very range-bound because of a turnaround and because of its mixed performance metrics.  Estimates are $0.03 EPS and $139.79 million in revenues for the past quarter, yet the coming holiday quarter-end estimates are $0.08 EPS and $155.19 million in revenues, yet the company gave guidance of $0.04.  We will hold off on forward valuation multiples because each penny in an EPS scenario for a $3.36 stock will skew the ratios.  October same-store sales were down 1.3%.

Zumiez, Inc. (NASDAQ: ZUMZ) is the last of the retailers we track for next Thursday.  As much as you have seen “Thursday” you may have figured that was never-ending.  Estimates for the action sports equipment and apparel retailer are $0.14 EPS and $111.89 million in revenues for the last quarter.  For the important holiday quarter-end ahead the estimates are $0.24 EPS and $130.97 million in revenues.  Before last quarter, Zumiez had a habit of beating estimates handily. Unfortunately, its same store sales in October were off by -8.9%.

Ann Taylor Stores Corp. (NYSE: ANN) is on deck next Friday morning.  Estimates are $0.06 EPS and $476.2 million in revenues.  Shares are just under $13.00 and the 52-week trading range is $2.41 to $17.50.  While shares have recovered handily from 2008 lows, this one has never recaptured its mojo from when it lost its growth trajectory from 2000 to 2007.

Again, these estimates are likely to change slightly ahead of the actual earnings report next week.  This is also not every single company in the retail and apparel sector with earnings on deck and it follows a sloppy reaction from the retail and apparel reports from many peers this week.  The notion that many CEOs and CFOs this week have not been very clear on what to expect for the holiday season leaves us with even more pause after the significant stock runs we have seen.

Target Corp. (NYSE: TGT) is also on deck next Tuesday.  That one is large enough compared to the rest of the crowd that we are holding to give a very detailed analysis and preview on Monday.

JON C. OGG
NOVEMBER 13, 2009