Gordmans earnings report shows more declining sales; CEO says ‘it’s all fair game’ for cost cutting – Omaha World

For the past three years, Omaha-based Gordmans has been up against declining sales, bloated inventory and a competitive retailing world.

After the company reported another round of declining sales on Friday, that uphill slog looks likely to continue. The fourth-quarter decline in same-store sales marks a wrong turn for the company, which in the third quarter reported its first such sales increase in three years.

Still, some on Wall Street are hopeful that Chief Executive Andy Hall, who took over in 2014, has begun to put the pieces in place to create a profitable discount department store business.

Since Hall took the helm, he has hired a new head of merchandising and a new chief financial officer, launched a new e-commerce platform, put the brakes on building new stores and debuted a new marketing campaign.

More changes are expected in 2016: Hall announced Friday on a conference call with Wall Street analysts that the company has hired a national firm to conduct a third-party expense review in April.

From the corporate office to distribution operations and retail stores, “it’s all fair game” for cost cutting, Hall said.

The company employed about 250 people in its Omaha headquarters as of late last year.

The company also plans to implement a new point-of-sale system this year and has begun using strategies of competitors like Ross Stores, including buying end-of-season goods at low prices and packing them away until the next year.

Fourth-quarter earnings hit Wall Street expectations on the nose at 6 cents per diluted share, the company said Friday, but it wasn’t enough to woo investors: The company’s stock was down almost 5.5 percent on the day and closed at $2.41 a share on the New York Stock Exchange.

The earnings were likely overshadowed by the comparable store sales that were down 2.2 percent over the fourth quarter in 2014.

Like most retailers, Gordmans was hurt in the fourth quarter by unseasonably warm weather that affected many of the markets where the retailer operates stores, Hall said.

Hall also tempered expectations for the first quarter of 2016, saying sales so far have been choppy, and weather was not to blame this time as it was for the sporadic fourth quarter. Comparable store sales were expected to remain flat or down by up to 2 percent.

“I think the choppiness is less weather-related and more consumer-related,” Hall said. “I’m not sure why it’s consumer-related, but I think it is.”

A reading of U.S. consumer sentiment unexpectedly soured Friday, with the University of Michigan’s national consumer survey saying concerns about rising gasoline prices and broader questions about the global economy painted a less-optimistic picture in March.

Still, some analysts are hopeful all of the changes at Gordmans might pay off this year.

“The steps that management has put in place over the past year should have a positive impact in 2016,” said Richard Jaffe, an analyst with Stifel Nicolaus in New York. “With a relatively new management team … and various strategic initiatives in place, we believe the company is better positioned for further improvement.”

In 2015, comparable store sales were down 1.3 percent, much better than the negative sales reported in 2014 and 2013, which were down 4.8 percent and 7 percent, respectively.

While things are moving in the right direction, the disappointing fourth quarter and a tempered first quarter are probably more than just a hiccup, said Ken Perkins, president of research firm Retail Metrics in Boston.

“They’re going to need to show the investment community that they can generate several quarters in a row of positive comps moving in the right direction,” Perkins said of positive same-store sales. “I don’t get the sense that it is a blip in the road.”

The discount retailer space is crowded, and many of Gordmans’ competitors are heavyweights. The Omaha retailer has about 100 stores, while competitors like TJ Maxx have thousands.

“They’re in such a competitive space, trying to create a niche with so many off-pricers and so many other deep discounters,” Perkins said. Their growth “certainly lagged the rest of the industry.”

But Gordmans is in the same boat as many other retailers: trying to compete for market share when consumers are spending less and less on apparel and more on dining, vehicles and travel, Perkins said.

Some good news for 2016: Apparel sales may be on their way back up.

“There are some signs that the tide may be turning, with a cyclical rotation back into apparel,” he said. “So we’ll see. We’re watching it closely.”


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