Retail market weighs down Christopher & Banks

The dismal retail environment and prospects for a bleak holiday sales season are taking their toll on Christopher & Banks Corp.

The Plymouth-based women's apparel retailer Thursday reported a substantial drop in earnings and sales for its second quarter ended Aug. 30 and forecast third-quarter income significantly lower than analysts' recent estimates.

The results were announced after the stock market closed. Christopher & Banks' stock, which had fallen about 3.5 percent Thursday in regular trading to close at $8.66 per share, fell another 11 percent in after-hours trading. The stock, which had begun to climb in August after gas prices moderated, ended last week at about $11.50 a share before its steady descent this week. Margaret Whitfield, an analyst at Sterne Agee, downgraded shares Tuesday, citing "recent weak mall traffic."

That prediction came true. In a conference call with analysts Thursday, Christopher & Banks CEO Lorna Nagler acknowledged that slower mall traffic is hurting sales.

It's a problem shared with several other women's specialty retailers. In the last week Talbots and Chico's stocks also have been downgraded by analysts while Coldwater Creek, and New York & Co. have lowered their earnings estimates. Dress Barn this week reported sharply lower quarterly earnings.

Industry experts have forecast poor holiday retail sales because of higher prices for food and gas, tighter credit and consumers' eroding confidence in the economy. A report issued last week by Merrill Lynch said overall same-store sales would likely decline, with department stores and specialty retailers among the weakest performers.

Christopher & Banks sales for the second quarter were $131.6 million compared with $141.1 million for the same period a year earlier. Same-store sales dropped 13 percent, while the number of transactions per store declined 19 percent.

The company said operating earnings for the third quarter should be 10 cents to 13 cents a share, based on the assumption that same-store sales will continue to be about 13 percent lower than last year. That's considerably lower than the 21 cents a share estimated this week by Whitfield and 19 cents a share estimated in a report this week by Chris Krueger, an analyst at Minneapolis-based Northland Securities.

"That's pretty dramatic," said Krueger. His report estimated sales for the year at $567.2 million, but Krueger said he likely will trim that to around $550 million. He expects to slash his per-share earnings estimate for the year from 42 cents to a range of 25 cents to 30 cents.