J.C. Penney, Dayton Hudson, Limited Top Estimates - TheStreet

J.C. Penney, Dayton Hudson, Limited Top Estimates

Shoppers continue to favor discount stores and specialty stores over department stores.
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Three retailers reported divergent earnings Tuesday as shoppers continued to favor discount stores and specialty stores over department stores.

While unseasonably warm weather across the country somewhat slowed sales of jackets and sweaters and such, consumer spending is up 6% to 7% over last year, said Asma Usmani, retail analyst for the firm

Edward Jones

.

But the earnings reported Tuesday by

Limited

(LTD)

,

Dayton Hudson

(DH)

and

J. C. Penney

(JCP) - Get Report

showed that many fall shoppers preferred to spend their money outside of department stores. Of all the businesses controlled by the three companies, J.C. Penney and the

Mervyn's

unit of Dayton Hudson reported the weakest results.

"The consumer in the 1990s has become very value-conscious," Usmani said. "Department stores lost sight of relating to the consumer that not only can you get good quality products, you can get low prices."

The coming quarter, which includes sales to holiday gift-givers, is the make-or-break season for apparel chains.

Usmani rates Dayton Hudson stock a buy. Her firm hasn't done underwriting for the company, and she doesn't cover the other stocks.

Dayton Hudson said third-quarter profits jumped 32% from a year ago, beating Wall Street expectations by 2 cents a diluted share.

For the third quarter ended Oct. 30, the Minneapolis-based company reported net income of $241 million, or 52 cents a diluted share, on net revenue of $8.009 billion. For the year-ago quarter, earnings were $183 million, or 39 cents a diluted share, on revenue of $7.288 billion. Analysts surveyed by

First Call/Thomson Financial

expected the company to earn 50 cents a share.

The earnings don't include a charge of $9 million, or 2 cents a share, the company took to repurchase debt.

Pre-tax profits at Dayton Hudson's

Target

jumped to $411 million from $293 million while pre-tax profits at Mervyn's fell to $46 million from $53 million. For Dayton Hudson's department stores division, pre-tax profit grew to $79 million from $78 million, but same-store sales, those at stores open more than a year, fell 0.2% and gross margins fell slightly.

By late morning Tuesday, Dayton Hudson's shares were down 2 at 60. (Dayton Hudson closed down 1 1/4 to 60 3/4.)

J.C. Penney said third-quarter profits fell 23% from a year ago, but the company still beat Wall Street expectations by a penny a share.

For the third quarter ended Oct. 30, the Plano, Texas-based company reported net income of $142 million, or 51 cents a diluted share, on net revenue of $8 billion. For the year-ago quarter, earnings were $186 million, or 68 cents a diluted share, on revenue of $7.5 billion. Analysts surveyed by First Call expected the company to earn 50 cents a share.

Comparable store sales fell 3% at the department stores for which Penney is best known. The company also runs

Eckerd

drugstores, where comparable-store sales jumped 9.6%.

Penney's stock was trading up 3/4 at 24 3/16 by late morning. (The stock closed up 3/16 to 23 5/8.)

Meanwhile, Limited, which runs specialty apparel chains devoted to their own brands, said third-quarter profits rose 16% from a year earlier.

For the third quarter ended Oct. 30, the Columbus, Ohio-based company reported net income of $40.8 million, or 18 cents a diluted share, on net revenue of $2.064 billion. For the year-ago quarter, earnings were $35.1 million, or 15 cents a diluted share, on revenue of $2 billion. Analysts surveyed by First Call expected the company to earn 15 cents a share in the latest quarter.

The results exclude gains from the sale of the company's 60% stake in

Galyan's Trading Co.

earlier this year and other one-time items.

Comparable-store sales at the company's

Lane Bryant

,

Structure

, Limited,

Lerner

and

Express

increased by margins ranging from 3% to 11%.

Limited's shares were trading down 7/16 at 38 1/16. (Limited finished up 1/16 to 38 9/16.)