From news services
J.C. Penney says the tumultuous economy is making it impossible to predict earnings over the next year. Macy’s asserts that providing monthly sales information is too distracting and confusing. And Starbucks argues that annual profit estimates are unnecessary.
In American retailing, less is suddenly more — at least when it comes to giving investors the sort of financial information they have long expected from companies.
Faced with an economic slump, a growing number of national retailers are abandoning the longstanding tradition of reporting monthly store sales and forecasting annual profits.
The stores say they are eliminating dated practices that encourage short-term decision-making and can confuse investors.
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But many Wall Street analysts and investors, who rely on these numbers to gauge a company’s health and the mood of the American consumer, are crying foul. The motive for providing less financial insight, they suspect, is to avoid issuing embarrassing numbers in the middle of a recession, numbers that can drive down a company’s stock price.
So far this year, Starbucks, Macy’s, CVS Caremark and Jos. A. Bank have ditched one or both of the financial reporting practices that were once standard in retailing.
And Wednesday, J.C. Penney joined the list, saying it would stop offering annual profit estimates, known in the industry as guidance, at least for now. (It will still provide monthly sales and quarterly profit estimates.)
Myron E. Ullman, the chief executive of J.C. Penney, said with the housing market in turmoil and gas prices surging, "there is not enough visibility to give something meaningful."
The analysts who track J.C. Penney and the rest of the retail business can barely contain their frustration with all the lip zipping. "Withholding information is not what investors want," said Bill Dreher, a longtime retail analyst at Deutsche Bank Securities. "They want clarity."
A tough economy, Dreher added, "is a time to be more communicative, not a time to deprive us of guidance or clamp down on information."
Though they have no legal obligation to do so, most publicly traded retail companies divulge their monthly sales performance and offer an estimate of their annual profits, with the figures becoming guideposts for Wall Street, economists and investors.
The profit forecasts allow stores to set reasonable expectations for investors, and minimize the chances for surprises, which Wall Street tends to dislike.
