Maidenform Brands, Inc. (NYSE:MFB) badly missed Wall Street estimates for quarterly results released Wednesday, as the company faced sagging demand for the bras that support the bulk of its sales. The company's results, specifically its breakdown of sales growth by retailer type, painted an unflattering picture of a consumer economy weighed down by recessionary pressures.
Maidenform reported earnings of 44 cents a share on net sales of $148.22 million. Analysts on Wall Street were expecting earnings of 55 cents per share on revenues of $165.95 million. Net earnings for the quarter were $10.19 million, some 20.32 percent less than a year ago. The company said it did not expect the situation to improve in the near future.
While we increased sales and market share in the third quarter, we are disappointed with our earnings performance, which was below our expectations. The quarter was impacted by several factors, including a decline in consumer traffic in our category, that suppressed sales and drove higher costs to promote and liquidate overstocks. We expect these conditions to persist in the fourth quarter and we are taking action to mitigate them. To this end, we have instituted several new initiatives to increase sales, expand our gross margins and control our spending, and we look forward to growing Maidenform's profits in 2012 and beyond, stated Maurice S. Reznik, Chief Executive Officer.
Sales of Maidenform-branded products were down at department stores but up at what the company termed mass merchants. The firm noted its gross margin fell on changes in channel and product mix, including a higher percentage of net sales to the mass channel and off-price retailers. In other words, it mainly saw growth selling lower-margin items through discount retailers.
Underwear sales are seen as very sensitive indicators of the general economic mood, as demand for the product is one of the first things to suffer when consumers cut back on spending. Sales of men's underpants was a metric famously used by former Federal Reserve chairman Alan Greespan as an economic prognosticator. More recently, other analysts track sales of women's lingerie, including figures provided by Maidenform, as part of a wider bra index.
Maidenform's disappointingly small sales also point out to a wider trend of the current economic environment, where a spike in income inequality has affected consumers of normal goods more than those of luxury products. Maidenform competitor Limited Brands, Inc. (NYSE:LTD), which markets and sells the high-end Victoria's Secret line of undergarments is doing exceedingly well as of late, hitting a 52-week high of $45.45 on October 27. It has since settled a few dollars under that range, in anticipation of quarterly results November 13.
Shares of Maidenform Brands, Inc., after touching a 52-week low of $17.80 earlier in the day, were selling for $18.38 in early-afternoon trading, down $5.74 or 23.80 percent from the previous day's close.