Portfolio: Outlook Group Sees Strong Q1; Many Retailers May Drag

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September was strong for Outlook Group Corp., a printing, packaging and direct marketing company. Its stock rose 53.81 percent from $10.24 on Aug. 30 to close at $15.75 on Sept. 27. The increase came mainly from a positive fiscal first quarter earnings report released two weeks ago.


Outlook Group, Neenah, WI, said net sales climbed 34.4 percent to $23.1 million from $17.2 million in the year-ago period. Net earnings jumped 73.8 percent to $1.2 million from $703,000.


"The significant improvement is a direct result of our strategies to increase sales and enhance productivity," president/CEO Joseph J. Baksha said in a statement.


Sales increased from both existing and new clients, Baksha said, and earnings were propelled by increased capacity usage and absorption of overhead through higher sales. He cited client response to a new four-color digital printing press from Kodak as a factor in the first quarter, as well as the company's strategy to develop long-term customer relationships.


Will Coldwater Creek Run Hot or Cold?


Retailers release September sales next week -- the first batch of financial news since two hurricanes hit the Gulf Coast. Coupled with higher gas prices and warm weather in the Northeast and Midwest, the month could be a dud.


"I think both factors [hurricanes, warm weather] will impact September sales," Rosalind Wells, chief economist at the National Retail Federation, told DM News. "But we won't be able to determine how much from each."


One company that may buck the trend is Coldwater Creek. Despite its stock dropping from $30.74 to $26.04, down 15.29 percent for the month, some analysts are bullish about the company's prospects. Coldwater Creek's profit almost doubled in the third quarter, and it raised its guidance for the fall. It also saw strong growth in Internet sales, an important factor as most analysts predict an increase in online shopping because of the higher gas costs.


And the warm start to the fall clothing season shouldn't hurt the company as much because Coldwater Creek sells jewelry, art, kitchen appliances and garden supplies in addition to clothes. Its customer base of women ages 35-60 also may work in its favor. On Sept. 22, investment bank Brean Murray raised its opinion on Coldwater Creek from "hold" to "accumulate," in no small part because of its customer demographics. Wells agreed.


"They'll outperform the others," she said. "Their customers are less vulnerable to the high energy costs."


Still, analysts expect Coldwater Creek to be the exception, and this week's earnings could be the start of a challenging holiday season. In early September, American Eagle lowered its earnings outlook and Merrill Lynch analyst Mark Friedman cut estimates for Abercrombie & Fitch, Aeropostale, Gap, Limited Brands and Pacific Sunwear.


The NRF already predicted a slower holiday shopping season before the bad weather and high energy prices. Still, Wells said she doesn't expect a disaster.


"It will take things down a little bit more, but it's not like it will be a great collapse," she said.


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