Specialty Retailers Struggle as Gas, Food Prices Rise

Given the ornery economy, competition among specialty stores has gone from fierce to downright Darwinian.

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Comparable-store sales fell 8 percent at Victorias Secret

Comparable-store sales fell 8 percent at Victoria's Secret.


Given the ornery economy, competition among specialty stores has gone from fierce to downright Darwinian.

Shoppers are holding their pocketbooks closer than ever and any stumble on the part of stores can reverberate loudly when it comes time to report quarterly financial results. Proving the point, Limited Brands Inc., Talbots Inc. and Charming Shoppes Inc. all posted lower comparable-store sales in the first quarter as Ross Stores Inc. managed a slight gain.

Bottom lines also showed the pressure of a picky consumer who wants fashion in spite of the economic pressures faced by stores.

"A lot of retailers aren't hot," said retail analyst Jennifer Black. "They might be warm, they might be room temperature, but you have to be hot to capture the consumers' attention and dollars."

J. Crew and Abercrombie & Fitch Co. are two chains that have been on their fashion game, according to Black.

"In today's world, there are so many great retailers that you have to be the best to get the consumer's dollar," she said.

Many specialty stores have struggled and are tightly controlling inventories and expenses.

"Earnings were terrible, but they beat the Street's consensus," said Richard Jaffe, retail analyst at Stifel Nicolaus.

Stores will only be able to get so far by trimming the fat, though.

"Retailers can only cut expenses for a couple of quarters, but they can't do it forever," said Jaffe.

Just when the consumer will be in the mood to spend again is retail's million-dollar question. With gas prices at record highs, job losses mounting and higher food prices squeezing out other purchases, it might not be until 2009 before retailers see a real turnaround.

And investors are increasingly nervous, on Wednesday trading down retail shares as rising oil prices and inflation fears stirred concern. The Dow Jones Industrial Average lost 1.8 percent to close at 12,601.19, while the S&P Retail Index fell 2.5 percent to end the day at 394.34.

Among the chains reporting first-quarter results: shares of Talbots rose 5.9 percent to $7.88 on better than expected earnings, as Charming Shoppes was off 4.8 percent to $5.37 and Ross Stores dipped 2.3 percent to $34.12, despite a strong showing.

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