Aug 20, 2009
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Clothing makers beat estimates, but outlooks mixed

Aug 20, 2009

By Alexandria Sage

SAN FRANCISCO (Reuters) - Phillips-Van Heusen Corp (PVH.N), Gymboree Corp (GYMB.O) and Hot Topic Inc (HOTT.O) posted better-than-expected quarterly results on Wednesday 19 August but gave disappointing outlooks, sending shares of the clothing manufacturer and retailers down in after-hours trade.

But shares of Limited Brands Inc (LTD.N) rose 1 percent after the operator of the Victoria's Secret and Bath & Body Works chains forecast a full-year profit range that was better than analysts were expecting.

At Limited Brands, adjusted earnings of 19 cents in the second quarter beat the 16 cents expected, on average, by Wall Street. Net income fell 27 percent to $74.3 million.

Earlier on Wednesday 19 August, Perry Ellis International (PERY.O), known for its men's clothes, reported a narrower-than-expected loss and forecast full-year profit above Wall Street estimates, sending shares up 17 percent to $10.45.

Phillips-Van Heusen, a manufacturer that owns the Calvin Klein brand, said its adjusted profit was 60 cents per share, above the 44 cents analysts expected, according to Reuters Estimates. The company cited cost cuts, tightened inventory and strength in its wholesale and retail sportswear businesses.

The company raised its earnings forecast for the full year to a range of $2.30 to $2.40 per share from a prior view of $2.05 to $2.30 per share.

Still, the new range did not reflect an equal gain from the strong second-quarter performance, suggesting that the company was being somewhat conservative in its projections, said Wedbush Morgan analyst Jeff Mintz.

The company's shares fell 1 percent to $34.85 after hours.

At Hot Topic, which sells rock n' roll-inspired apparel, accessories and music, a quarterly net loss per share was a penny better than expectations, while a third-quarter earnings outlook fell just below Wall Street's view. Shares fell 2.2 percent after hours.

Wall Street Strategies analyst Brian Sozzi wrote that Hot Topic faced difficult comparisons with the prior year on margins and same-store sales in light of last year's launch of clothes tied to the successful "Twilight" series.

At Gymboree, a 5 percent gain in total sales and a lower tax rate boosted net income in the second quarter, but a third-quarter earnings forecast range of 95 cents to $1.03 per share fell shy of an average analyst expectation of $1.05.

The head of research firm Retail Metrics, Ken Perkins, said investors want to be shown signs of good news, given that retail stocks have been rising steadily since lows in March.

"Management may still be cautious in guiding lower, but the investors are looking for more improvement in the guidance as well as finally showing some top line growth which most people still aren't doing," Perkins said.

It's hard to gauge whether companies are being overly cautious in their outlooks for the year, Perkins said.

"If you overpromise and underdeliver you get killed, but a lot of these stocks have run up so much," he said. "Investors are getting in ahead of the recovery. Now it's the 'Show me' phase."

(Additional reporting by Lisa Baertlein in Los Angeles, Martinne Geller in New York, Nivedita Bhattacharjee and Vidya Lakshmi in Bangalore; Editing Bernard Orr, Matthew Lewis, Leslie Gevirtz)

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