Women's apparel retailers disappoint in December

By Brad Dorfman

CHICAGO (Reuters) - Women's apparel retailers AnnTaylor Stores Corp <ANN.N> and Chico's FAS Inc <CHS.N> posted worse-than-expected sales in December, continuing a months-long trend of disappointment in that corner of the retail universe.

But while AnnTaylor shares plunged more than 14 percent, Chico's stock moved higher as the company said it expected margin levels to return to normal early in the coming fiscal year after it cleans out inventory.

Retailers who sell clothes to women aged 35 and older -- known as the "missy" segment -- have been hammered by the weak economy and excess inventories that have forced deep discounting.

Their customers are seen as more likely to rein in spending in a weak economy, as mothers and grandmothers are more likely to buy less for themselves in order to continue to spend on their children and grandchildren.

At the same time, the clothes sold in most women's apparel stores tend to be classic styles that need updating less frequently.

"I think that the 'missy' customer is still not ready to step up and spend," said Liz Pierce, analyst at Roth Capital Partners.

Chico's on Thursday posted a 13.7 percent sales decrease in December at stores open at least a year due to promotions and higher markdowns. Analysts on average had forecast a fall of 11.1 percent, according to Reuters Estimates.

Chico's also forecast a loss of 13 cents to 16 cents a share for the fourth quarter, not the break-even results it forecast a month ago.

"Although we are certainly not pleased with the results of this quarter, we remain committed to returning to profitability in the first quarter of fiscal 2008," said Scott Edmonds, Chico's chairman and chief executive.

For AnnTaylor, December same-store sales fell 9.4 percent, much worse than the 1.4 percent decrease forecast by analysts.

The retailer also said it expects to earn between $1.80 and $1.85 per share for fiscal 2007. It had previously forecast $2.05 to $2.15 per share.

Analysts, on average, expect $2.07 per share.

Another retailer focused on women that posted disappointing sales was Limited Brands Inc <LTD.N>. The owner of Victoria's Secret and Bath & Body Works said same-store sales fell 8 percent in December, worse than the 4.1 percent decline forecast by analysts.

But Limited said fourth-quarter earnings would still be within its forecast range, though at the low end or midpoint of that forecast. Its stock rose 17 cents to $15.86.

AnnTaylor shares were down $3.80 to $19.80 at midday on the New York Stock Exchange, while Chico's shares were up 20 cents at $7.50.

(Editing by John Wallace)