"CWTR did not offer specific Q4 guidance but suggested if November trends continued into December that a loss of 25-35c would be reported," wrote Whitfield, who has a neutral rating and 12-month price target of $4 on the stock.
While tax-loss selling might be a factor as well, the realization that the company is facing a slog of at least three months before new merchandise can make a splash may also be setting in, prompting investors to exit positions until there's more of a tangible possibility for a positive catalyst.
The fact that there's no guarantee the company's next collection won't get a similar negative response and questions about whether former fans of the stores will return are also likely to influence market sentiment from here.
While seven of the eight analysts covering the stock, including Whitfield, are at the equivalent of hold ratings, the market action on Thursday indicates plenty of investors don't share that opinion. Book value of $2.49 per share as of the end of the third quarter may provide some support, but with expansion plans scaled back for 2011, the near-term outlook is bleak and creative director Jerome Jessup has his work cut out for him.
Roth Capital echoed this sentiment in its own Dec. 2 note, which brought its 12-month price target on the stock down to $3 from $4.
"While we believe some of the issues are fixable sooner rather than later, i.e. marketing and more opening price points, several large challenges remain, most importantly, the merchandise," the firm said, adding that "there is very little near-term sales and earnings visibility" with improvements not expected until March.
Written by Michael Baron in New York.
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