Gordmans Outperforms in 4Q

Gordmans Stores Inc. (GMAN - Snapshot Report) posted earnings per share of 53 cents in the fourth quarter of fiscal 2011, outpacing the Zacks Consensus Estimate of 50 cents as well as the year-ago quarter’s 44 cents. Earnings outperformance was mainly aided by improvements in comparable store sales and gross profit margins.

In fiscal 2011, earnings per share were $1.30 per share versus 89 cents recorded in the year-ago quarter.

Behind the Headline Numbers

Net sales for Gordmans Stores grew 10.0% year over year in the fourth quarter to $185.1 million. In fiscal 2011, net sales grew 6.7% to $551.5 million driven by the opening of six new stores and a comparable store sales increase of 0.7%.

Quarterly comparable store sales (comps) increased 2.1% year over year. Home fashions stole the show in the fourth quarter, clocking a mid single-digit comparable store sales increase. This was followed by the apparel business, which generated a low single-digit comps increase. However, the accessories division was a dampener in the quarter, with a low single-digit decrease in comps.

During the quarter, Gordmans Stores' gross margin expanded 30 basis points (bps) to 40.1%. Selling, general and administrative costs as a percentage of total revenue were down 40 bps year over year mainly due to lower corporate expenses and store expenses.

Financials

At quarter end, Gordmans Stores had cash and cash equivalents of $35.4 million and total non-current liabilities of $21.7 million.

Outlook

For the first quarter of 2012, management expects net sales in the range of $132–$133 million and earnings per share in the range of 40–41 cents.

For full fiscal 2012, Gordmans Stores has a top-line expectation at $629 million to $634 million, reflecting a low single-digit uptick in comparable store sales and opening of nine new stores. Guidance for earnings per share was $1.46–$1.51.

Our Take

Gordmans Stores houses a large pool of the latest brands and fashion, and operates around 77 stores in 17 Midwestern and surrounding states in the U.S. The company is in an expansion mode. Apart from the existing markets, the company is also testing expansion possibilities in the new markets of Columbus, Dayton and Cincinnati, Ohio.

Additionally, fiscal 2012 includes an additional week. Management projects $7.5 million to $8 million in sales in the 53rd week in 2012 that will likely translate into an incremental 1.3% comps in fiscal 2012 compared to fiscal 2011.

However, stiff competition in the industry and increasing cost pressure remain other concerns for the company.

Gordmans Stores, which competes with Dollar Tree Inc. (DLTR - Snapshot Report), currently retains a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. We are also maintaining our long-term “Neutral” recommendation on the stock.