UPDATE 3-Charming Shoppes posts Q1 profit, but Q2 outlook bleak

miércoles 21 de mayo de 2008 20:13 CEST

(Recasts; adds background, conference call details, share movement)

By Anne Pallivathuckal

BANGALORE May 21 (Reuters) - Women's plus-size apparel retailer Charming Shoppes (CHRS.O: Cotización) posted a surprise quarterly profit, but forecast weak second-quarter results as it struggles to cut costs and weather a challenging retail environment, sending its shares down 11 percent.

The company has operated with much leaner inventories to improve merchandise margins as customer visits to its stores fell in the wake of rising fuel prices and the U.S. economic downturn.

Since hitting a 52-week high of $12.92 last May, Charming Shoppes' stock had lost more than two-thirds of its value to touch a low of $4.01 in January.

But the stock has recovered 39 percent from its January low as the company cut jobs, closed stores and planned to shed its non-core brands.

Charming Shoppes, whose core brands include Lane Bryant, Catherines and Fashion Bug, had also earlier this month resolved a proxy contest with hedge funds Crescendo Partners and Myca Partners by appointing two of their nominees to its board.

JP Morgan analyst Christopher Kim had said earlier he believes the company has taken the right steps in protecting its margins, but sales would be hurt given difficult store traffic trends and its "economically-sensitive customer base."

On Wednesday, Charming Shoppes said it continued to see weak traffic at its outlets and forecast second-quarter results from continuing operations in the range of breakeven to a loss of 2 cent a share. The forecast includes a charge of 3 cents a share related to streamlining efforts.   Continuación...