LNT's Profits Sink

Clifton, N.J. — Hobbled by a disappointing back-to-school season, falling sales, rising stockpiles and higher costs, third quarter profits at Linens 'n Things plunged 94 percent, to $1 million from $17.2 million last year.

Hurt by sharply lower traffic in its stores as a new fashion and trade-up merchandising program apparently failed to entice price-conscious consumers, overall sales fell almost 4 percent, despite the addition of 11 new stores. Sales slumped 3.8 percent, to $629.3 million from $654.2 million last year. The crucial gauge of same-store sales fell 10.2 percent.

“We experienced significant traffic declines throughout the third quarter as the initiatives we had undertaken to emphasize fashion and better price points in our merchandise resulted in a weaker value perception to our guests,” said Norman Axelrod, chairman and CEO.

Looking ahead to the Christmas quarter, Axelrod said the big-box retailer will return to a focus on value. “Looking to the rest of the year, we have taken what we believe are the appropriate steps to ensure that our value message is clear and consistent in our stores and in our marketing,” he said.

On the plus side, said Axelrod, “The launch of the Nate Berkus Collection offered exclusively at Linens 'n Things has been well-received and we are excited about the fresh appeal this brand has and the potential it brings to drive traffic to our stores.”

While margins held steady during the third quarter at 41.1 percent, costs climbed sharply, putting pressure on the bottom line. Measured as a percentage of sales, costs rose 380 basis points, or 3.8 percentage points, to 40.6 percent from 36.8 percent. In absolute dollars, costs rose 6.2 percent, to $255.5 million from $240.7 million.