Teen apparel retailer rue21 Inc. (RUE) Wednesday reported a drop in profit for the first quarter, hurt mainly by higher expenses that offset revenue growth and stronger margins. Earnings for the quarter fell short of Wall Street expectations, as did revenues. Looking ahead, the company lowered its full-year earnings outlook.
Warrendale, Pennsylvania-based Rue21's first-quarter profit dropped to $10.8 million or $0.44 per share from $11.6 million or $0.46 per share last year. On average, five analysts polled by Thomson Reuters expected earnings of $0.46 per share for the quarter. Analysts' estimates typically exclude special items.
Rue21's revenues grew 9 percent to $224.4 million from $205.6 million last year. Five analysts had a consensus revenue estimate of $229.83 million for the quarter.
Comparable store sales, or sales from stores open for at least a year, decreased 4.6 percent compared to a 1.7 percent increase last year.
Gross margin improved to 40 percent from 38.8 percent last year. However, selling, general and administrative expense increased 18.4 percent, due mainly to deleveraging of store payroll, stock compensation expenses, and e-commerce costs.
Looking ahead to the second quarter, the company expects earnings of $0.51 to $0.53 per share and low single digit comparable store sales. Analysts currently expect earnings of $0.40 per share for the second quarter.
For the fiscal year 2013, the company lowered its earnings guidance to a range of $1.98 to $2.03 per share, from its prior estimate of $2.00 to $2.05 per share. Analysts currently expect earnings of $2.02 per share for the year.
rue21, a fortnight ago, agreed to be taken private by private equity firm Apax Partners in an all-cash deal of about $1.1. billion. rue21, as per the agreement, is conducting an initial 40-day "go-shop" process in search of a superior acquisition proposal.
RUE closed Wednesday's regular trade at $41.98, up $0.09 or 0.21%, on the NYSE. The stock further gained $0.14 or 0.33% in after-hours trade.
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