Not-So-Hot Profit Ratio

Zale has used markdowns aggressively in an attempt to boost sales at its various jewelry store brands. Dave & Buster’s, where only 53 percent of revenues come from food and beverage, is suffering because customers are cutting back on game playing. Landry’s Restaurants has reinvented itself and is back under the control of founder Tilman J. Fertitta, but is still paying for discontinued operations going back as far as 2006. Three companies, three different ways to wind up on the Not-So-Hot Profit Ratio list.
Sears has experienced a number of ways earnings can be depressed, but indicates that 2009 might be different, with its cost controls paying off in the form of better margins. Inventory levels have been trimmed 7.7 percent from year-ago levels and total debt has been lowered 14.3 percent to $3 billion. In addition, sales and administrative costs at U.S. stores were reduced by $168 million.

99¢ Only Stores was in the process of closing down its 48-unit Texas division as the nation’s economy slipped from sluggishness into real recession and consumers returned to its discount stores in search of bargains. As sales picked up, management reversed itself and postponed the Texas exodus after 14 locations had been shuttered. The decision came just a month before the end of the fiscal year, so the premature closing costs took their toll on earnings.