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Executive Business Briefing

Here is a look at more of Thursday's top business stories:


Earnings jump at Foot Locker

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NEW YORK, May 22 (UPI) -- Foot Locker Inc. said its fiscal first-quarter net income jumped 90 percent from the year-earlier period, which included losses from discontinued operations. Improved profit margins helped offset weakness in sales.

The athletic-footwear chain said for the first-quarter ended May 3 it posted a net income of $38 million, or 26 cents a share, compared with $20 million, or 14 cents a share during the same period a year earlier.

The latest quarter's result included costs of $1 million, or one cent a share, for an accounting adjustment. The 2002 period included a loss of $18 million, or 12 cents a share, from discontinued operations.

Earnings from continuing operations edged up to $39 million, or 27 cents per share, from $38 million, or 26 cents a share, a year earlier.

The latest result matched the mean estimate of analysts polled by Thomson First Call.

Sales rose 3.5 percent to $1.13 billion from $1.09 billion a year ago. But, first-quarter same-store sales fell 2.5 percent. The decline in sales at stores open a year or more was steeper than the 0.8-percent drop analysts anticipated.

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Foot Locker expects second-quarter earnings to meet or beat Wall Street's current estimate of 24 cents a share, citing a 1.2-percentage point improvement in first-quarter profit margins.

During the first quarter, the company opened 17 stores, remodeled or relocated 60 stores and closed 42 stores. As of May 3 to, the company operated 3,600 stores in North America, Europe and Australia.


Charming Shoppes posts profit

BENSALEM, Pa., May 22 (UPI) -- Charming Shoppes Inc. said it posted a fiscal first-quarter profit, though sales fell 11 percent on weak consumer demand for apparel.

The company also lowered its earnings outlook for the second quarter and full year.

The operator of Lane Bryant, Fashion Bug and other clothing chains said it posted a first-quarter net income for the period ended May 3 of $9.7 million, or 8 cents a share, in contrast to a net loss of $31.8 million, or 28 cents a basic share during the sae period a year earlier.

In mid-March, Charming Shoppes lowered its earnings forecast for the quarter to a range of 8 cents to 10 cents a share, based on weaker-than-expected sales in February.

Charming Shoppes said results for the year-earlier quarter have been restated to reflect the adoption of accounting rules for vendor allowances and amortization of goodwill. Excluding the effects of these accounting changes, earnings would have been $17.3 million, or 14 cents a diluted share, the company said.

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Sales slid in the latest period to $564.3 million from $630.6 million a year ago.

Sales in stores open at least a year, a closely watched indicator of performance in the retail sector, fell 6 percent. In March, the company projected comparable-store sales in the negative mid-single-digit percentages.

Dorrit J. Bern, chairman, chief executive and president, said the Lane Bryant business continued to underperform as those stores tried to sell the spring apparel assortment that didn't appeal to customers. The company has put a turnaround plan in place for Lane Bryant, and expects improved merchandise mixes for the fall 2003 season.

Overall, Bern said, fewer shoppers came to its stores during the quarter as the weak economic environment has led to soft consumer demand for apparel.

The company partly offset sales shortfalls by reducing expenses. In addition, strong inventory management resulted in improved margins at Fashion Bug and Catherine's Plus Sizes stores, Bern said.

For the fiscal second quarter, Charming Shoppes projects earnings per share in the range of 12 cents to 14 cents, below its previous estimates of 16 cents a share.

For the full fiscal year, the company expects total sales of about $2.3 billion and earnings per share in the range of 26 cents to 28 cents.

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In February, Charming Shoppes projected net sales for the year of about $2.4 billion and earnings in the range of 33 cents to 35 cents a share.

The latest projections assume expenses related to the cost-reduction plan outlined in March of $3.5 million, or 3 cents a share, for the second quarter and about $6.4 million, or 5 cents a share, for the year.

The company expects the cost-reduction plan, which includes job cuts and consolidation of operations, to improve annualized pretax earnings by $45 million.

Charming Shoppes operated 2,245 stores at the end of the quarter, down from 2,415 stores a year earlier.


Losses narrow at ShopKo

GREEN BAY, Wis., May 22 (UPI) -- ShopKo Stores Inc. posted a narrower fiscal first-quarter loss compared with year-earlier results that included a hefty write-off for goodwill.

However, the discount retailer's revenue slipped 2.9 percent as consumers spent less, and the company said it now expects fiscal 2003 earnings at the low end of its previous guidance of $1.40 to $1.50 a share.

For the period ended May 3, ShopKo reported a net loss of $1.1 million, or 4 cents a share, compared with a loss of $185.6 million, or $6.46 a share during the same period a year earlier.

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Both periods were hurt by the adoption of new accounting rules. In the latest quarter, the retailer said a rule concerning vendor allowances reduced its results by $900,000, or 3 cents a share.

The loss in the latest quarter was in line with the company's forecast in April, when ShopKo said it expected results to be at the low end of previous guidance that ranged from break-even to a loss of five cents a share.

In the year-earlier quarter, ShopKo booked an accounting adjustment of $186.1 million, or $6.48 a share, to write off goodwill related to the 1999 acquisition of its Pamida store chain.

Revenue in the latest period fell to $711 million from $731.9 million a year ago. Same-store sales, or sales at stores open more than a year, declined 2.7 percent.

At the ShopKo retail division, revenue dropped 4 percent to $533.3 million. Pamida's revenue inched up 0.6 percent to $177.7 million.

While sales were disappointing at the ShopKo division, the retailer said it continues "to be encouraged by the improvement in sales trends" at the Pamida chain.

ShopKo said it sees second-quarter earnings between 25 cents and 30 cents a share, with a low single-digit decline in same-store sales. The retailer also said it expects a low single-digit decline in same-store sales for the full year.

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Sonic Corp. issues earnings outlook

OKLAHOMA CITY, May 22 (UPI) -- Sonic Corp. said it expects to report a net income of 40 cents to 41 cents a share for its first third-quarter and said that margins will be dampened by higher-than-expected costs.

Analysts on Wall Street were expecting the company to post a third-quarter net income of 41 cents a share, up from the 35 cents a share the company earned during the same period a year earlier, according to Thomson First Call.

The operator of drive-in restaurants said that system-wide same-store sales growth to date is near the low end of the 1 percent to 3 percent increase it has predicted for the quarter.

Sonic said higher-than-expected costs, particularly for health insurance, will likely constrain margins.

The company said it completed a system-wide rollout of its breakfast program to an additional 1,300 drive-ins across 68 markets during February and March. Sonic also noted that it completed a previously announced acquisition of 51 drive-ins in the San Antonio area on May 1.

The company expects to report third-quarter results during the last week of June.


Williams-Sonoma lifts earnings outlook

SAN FRANCISCO, May 22 (UPI) -- Williams-Sonoma Inc. said its net income fell 13 percent in the fiscal first quarter, but strong catalog sales helped produce better-than-expected results, prompting the company to boosted its guidance for the year.

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For the company's first-quarter ended May 4, the home-products retailer reported its net income declined to $13.4 million, or 11 cents a share, from $15.4 million, or 13 cents a share during the same period a year earlier.

The results beat a forecast the company offered in March, when it said it expected to earn 7 to 8 cents a share in the first quarter, well below Wall Street's expectations at the time of about 15 cents a share.

Revenue, including shipping fees, rose 12 percent to $536.8 million from $478.4 billion a year earlier. The company attributed the rise to better-than-expected consumer response to its Pottery Barn Teen and West Elm catalogs. Improvements in the supply chain and reduced overhead also helped results.

Same-store sales declined 0.8 percent, in line with company's projected range of a decline of 2 percent to growth of 1 percent.

Sales were up 5.4 percent at Williams-Sonoma stores and climbed 11 percent at company outlets, but were offset by a 4.4 percent sales decline at Pottery Barn, a 9.7 percent drop at Pottery Barn Kids and a 7.5 percent drop at Hold Everything stores.

Direct-to-customer sales, such as by catalog or Internet, increased 11.4 percent to $198.6 million, primarily driven by Pottery Barn and Pottery Barn Kids brands, the company said.

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In response to the higher-than-expected results, the company boosted its fiscal-year guidance, while maintaining its forecasts for the remaining quarters of the fiscal year.

Williams-Sonoma expects to earn $1.23 to $1.27 a share in the fiscal year ending Feb. 1, 2004, compared with a previous estimate of $1.20 to $1.24 a share. The revised outlook is above the current Thomson First Call estimate of $1.21 a share.

Revenue is projected at $2.65 billion to $2.72 billion for the year, with same-store sales growth of 1 percent to 3 percent.

For the year ended Feb. 2, 2003, the company's net income was $124.4 million, or $1.04 a share, on revenue of $2.36 billion.

Meanwhile, Williams-Sonoma also maintained its quarterly guidance, which falls in line with projections made by analysts surveyed by First Call.

In the second quarter, the company expects to earn 12 cents to 14 cents a share on revenue of $557 million to $575 million. Same-store sales are projected to grow by 2 percent to 4 percent.

The retailer also forecasts third-quarter earnings of 16 cents to 19 cents a share on revenue of $607 million to $625 million, and fourth-quarter earnings of 80 cents to 85 cents a share on revenue of $945 million to $981 million.

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