NEW YORK (
) -- Shares of
Christopher & Banks
tumbled Wednesday as investors interpreted the abrupt departure of both CEO Lorna Nagler and Chief Merchandising Officer Susan Connell as indicative of a bumpy road ahead for the women's apparel retailer.
Sterne Agee said the surprise turnover in the C-suite points to a deterioration in Minneapolis-based Christopher & Banks' business and it cut its rating on the shares to neutral from buy on the news.
"The departure of both the CEO and Chief Merchant suggests Board disenchantment with the product line and likely disappointing Q3 sales trends since its last call," the firm said in a note to clients. "CBK's moderate channel consumer is likely more impacted by macro events than some of the other boomer companies."
The stock finished down almost 14% at $5.83. Volume of 1.6 million was nearly seven times the issue's trailing three-month daily average of around 240,000. At their session low of $5.79, the shares were in shouting distance of their worst level in the past year of $5.48, and down nearly 50% since hitting a 52-week high of $11.60 in mid-April. The stock has also made a solid break below both its 50- and 200-day moving averages of $7.09 and $7.87 respectively.
In its press release after Tuesday's closing bell, Christopher & Banks said Chairman Larry Barenbaum, a board member since 1992, would serve in the CEO role on an interim basis as the company searches for a permanent replacement. Tuesday's shake-up follows the departure of the company's chief financial officer Rodney Carter in mid-July. Nagler had served as CEO and president since August 2007.
Sterne Agee called the timing of the news "curious" because Christopher & Banks said at the end of September that consumer response to its new fall lines was positive, a view that the firm noted was at odds with the commentary of competitors
. Coldwater Creek
about its third-quarter results earlier this week.
"Traffic had improved following the issuance of its
CBK's first 'magalog' in early September and another was planned in November for the holiday," said the firm, which also cut its 12-month price target on the stock by more than 35% to $7 from $11.
Sterne Agee left its earnings projections for the third and fourth quarter intact for the moment, but hinted adjustments could be on the way.
"Moreover, as the average age of its customer is 58, many are approaching retirement age with reduced spending on discretionary items," the firm said. "While we are not changing our estimates at this time, we note our conviction level in the achievement of positive comps in Q3 and Q4 is very low."
Christopher & Banks has limited coverage on Wall Street and of the four analysts currently following the stock, three now have hold ratings. The average estimate of analysts polled by
is for a profit of $3.92 a share in the three months ending in November with total sales anticipated at $132.8 million.
For its second quarter ended in August, the company lost $2.5 million, or 7 cents a share, on total sales of $101.3 million with same-store sales up 1% for the three-month period. At that time, Christopher & Banks forecast same-store sales growth in the low single digits for the current quarter.
Written by Michael Baron in New York.
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