Each month, we provide our clients an early analysis of sales disclosures on sales release Thursday. Below, are a few bigger picture thoughts that we published earlier this morning prior to the opening bell.

Mother’s Day Shift Underwhelms. Disconcerting Sales Trends at BKE, JWN, and KSS.

Click here for the full report and various ‘stack’ presentations.

Last week, TLB plummeted when it was announced that Sycamore Partners pulled out of their non-binding proposal to acquire all of its common stock at $3.05/share.

At the time of the above disclosure, the company also reported its financial results of Q1 2012. Interestingly, the company’s EBIT margin (excluding non-recurring items) increased +130 Bps in Q1 2012 versus LY.

Yes, it appears that the company’s outgoing CEO continues to ‘loot’ the company in the form of severance charges (another $766K in Q1 2012 on top of a similar $8.0 million charge in Q4 2011). See our EPS model attached.

But, the company’s profitability comparisions (e.g. 1-year and a 2-year EBIT margin ‘stack’) will be much easier to anniversary in Q1 2012 through Q4 2012. Therefore, the company has an even greater ‘opportunity’ to improve its year-over-year EBIT margin in Q2 – Q4 than the just announced +130 Bps in Q1 2012.
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Prior to the arrival of CEO Susan McGalla, WTSLA was a model of consistency. Between FY 2006 and FY 2011, WTSLA posted “Bernie Madoff-like” performance (see trailing 4-quarter chart below).

No longer. Is Ms. McGalla the problem? The below chart and the company’s Q2 2012 financial guidance implies that the company’s profitability has taken a (permanent?) turn for the worse.
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Each week, we highlight five articles of interest focusing on the retail/consumer space. Enjoy.

Talbots Deal Doesn’t Happen Click to Open PDF

Who would want a dead brand walking, even at less than $2.00 per share?
Date Published: Friday, May 25, 2012
Source: WSJ

Sony, Samsung Rein In Retailers’ Discounts on TVs Click to Open PDF

Good luck with that. With LG, Panasonic, and Sharp not participating, show-rooming reigns supreme.
Date Published: Wednesday, May 23, 2012
Source: WSJ (more…)

Wow! Negative mid-teen comps at the company’s international stores and U.S. tourist locations.

But, that’s not the worst part. ANF management suggested that its markdown reserve declined from $72.3 million at the end of FY 2011 to “less than last year” at the end of Q1 2012 (the markdown reserve at the end of Q1 2011 was $39.2 million).

What does this mean? Q1 2011′s markdown reserve increased $14.8 million in the quarter. Conversely, Q1 2012′s markdown reserve decreased at least $33.1 million. That difference of at least $47.9 million equates to incremental earnings versus LY simply via markdown reserves.

Again, ANF is one of the few retailers that show investors “how the sausage is made.” But, no matter how you slice it, this week’s numbers were UGLY and, in our view, suggestive of a material shortfall relative to the company’s current $3.50 to $3.75 annual EPS guidance range.
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