Tuesday, 25 September 2007

Retailers sound profit warnings

Last week it was transports, yesterday it was retailers with profit warnings.

Firstly Lowe's Companies Inc. (LOW) warned on Monday that full-year profit could trail its prior forecast, saying dry conditions in some parts of the United States were hurting sales. Analyst Colin McGranahan of Sanford Bernstein noted that:

"Lowe's sales trends have reversed the apparent improvement seen" in the second quarter.... "while part of the weakness is weather related, Lowe's cautious outlook on 2008 suggests underlying trends are weaker than the company expected against easy compares,"
"easy compares" means comparable sales from last year that were not great and thus expected that this year's comparable period would easily be better. The company said it now expects profit for the year ending in February to be at the low end or below a forecast of $1.97 to $2.01 a share it gave in August.

Target Corp. (TGT) said after the close on Monday that it now expects same-store sales to rise 1.5% to 2.5% for the month, down from its previous forecast of 4% to 6% citing particularly weak sales in the northeast. Analyst Edward Weller of ThinkEquity Partners had this to say:
"This is a little bit surprising," "It seems to be a setback." It's not clear why traffic fell during the month, but he said that a quick recovery should be in store for Target. "It's not like these guys don't know how to adjust and adapt to the environment,"
It seems to be a setback? I'd say that was a fairly significant revision given the relatively short time frame. It's not clear why traffic fell but they should recover. Gees, some top class analysis there. ThinkEquity Partners need to think a little harder.