Gordmans Stores Inc. (GMAN) posted earnings per share of 17 cents in the first quarter of fiscal 2013, ahead of the Zacks Consensus Estimate of 12 cents. However, quarterly results lagged the year-ago quarter earnings of 41 cents per share. Decline in comparable store sales combined with lower gross margin resulted in the year-over-year drop in earnings.
Behind the Headline Numbers
Net sales for Gordmans Stores declined 1.9% year over year in the first quarter to $131.4 million, hurt by decline in comps. Revenues missed the Zacks Consensus Estimate of $138.0 million.
Quarterly comparable store sales (comps) plunged 10.5% year over year in contrast to a 4.7% increase in comps in the prior-year quarter. Lack of variety in merchandise offerings in several categories and lesser demand might have hurt comps in the quarter.
During the quarter, Gordmans Stores' gross margin fell 250 basis points (bps) to 44.9% due to incremental markdowns to cut down inventory pile-up. Selling, general and administrative costs as a percentage of net sales were 40.8% versus 37.7% recorded in the first quarter of fiscal 2012.
Store Update
In the first quarter of 2013, the company opened three new stores in the existing market. Management remains steadfast to opening four stores ahead of the back-to-school selling season in Albuquerque, Minot, N.D., Milwaukee and Louisville, Ky. These all are new markets for the company.
Outlook
For the second quarter of 2013, Gordmans Stores expects net sales in the range of $135 and $137 million. Comparable store sales are expected to decline in low single digit. Earnings per share are expected in the range of 1 to 3 cents.
Our Take
Sluggish comps, inability to meet the revenue estimate in the last two quarters and persistent margin pressure remain concerns. The beginning of the year was also tepid for the company, which makes us cautious at the current level. Thus we prefer to adopt a wait and see approach.
Gordmans Stores currently carries a Zacks Rank #5 (Strong Sell). Retail industry stocks that are currently performing well include Dollar Tree Inc. (DLTR), Cabela’s Inc (CAB) and The TJX Companies Inc. (TJX) all with a Zacks Rank #2 (Buy).
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