September 26, 2008 / 5:42 PM / 10 years ago

UPDATE 2-Perfumania shares tank on weak Q3 same-store sales view

(Recasts throughout; adds conf call details, updates stock activity)

Sept 26 (Reuters) - Perfumania Holdings PERF.O forecast a fall in same-store sales in the third quarter, reversing its prior outlook, and tempered its store opening plans for fiscal 2009, sending its shares down 56 percent.

Shares of the fragrance distributor touched $9.29, their lowest in more than a year, before recouping some losses to trade down about $11 at $10.20 Friday afternoon on Nasdaq.

The company, which opened about 56 stores in fiscal 2008, said it would cut its store openings in the next financial year by about half or less, depending on its performance in the holiday season.

Perfumania, whose customers include retailers like Wal-Mart Stores (WMT.N), J.C. Penney (JCP.N) and Kohl’s (KSS.N), now sees a 2.5 percent drop in sales at stores open for at least a year in the third quarter, compared with its prior outlook of a rise of 5 percent.

Declining sales in August and September, inventory reductions at the company’s recently acquired Model Reorg business and lower orders from large customers hurt the quarter, the Bellport, New York-based company said.

U.S. retailers have been hurt by sluggish sales at their stores as consumers curtail their spending on non-essential items in the wake of rising food and fuel costs, falling home values, and tighter lending conditions.

In a conference call with analysts, the company, which bought privately owned Model Reorg Inc in August, said its current liquidity levels are below the $45 million to $50 million it had before the acquisition.

The company, which has been seeing weakening sales at its older as well as newer stores, said it posted an operating loss of $1 million from its newer stores.

For the first seven weeks of the third quarter, same-store sales are currently down almost 3 percent, the company said.

About 101,830 Perfumania shares changed hands in intraday trading Friday, about 10 times the 50-day moving average volume of the stock. (Reporting by Nivedita Bhattacharjee in Bangalore; Editing by Anil D’Silva) (( ; within U.S. +1 646223 8780; Outside U.S. +91 804135 5800; Reuters messaging:

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