Shares of Shoe Pavilion Inc. declined sharply Friday, after the discount shoe retailer predicted a wider-than-expected first-quarter loss, prompting a downgrade at Roth Capital.
After the market closed Thursday, the Sherman Oaks, Calif.-based company said it sees a quarterly loss of 13 to 14 cents per share, much larger than the 2- to 3-cent loss previously forecast. Shoe Pavilion said traffic and sales have declined because many new Shoe Pavilion stores are in new shopping malls still under construction.
On Friday, Roth Capital Partners LLC analyst Elizabeth Pierce said the problems experienced in the quarter might be more than near-term hassles.
"Even though we believe the reasons behind the shortfall are legitimate, i.e. construction and weather, and even though the shortfall was pretty much confined to the new stores, we believe the primary issues that impacted first-quarter results will linger throughout 2007 and possibly into 2008," she wrote in a note to investors.
Pierce downgraded the stock to "Hold" from "Buy," and cut her 2007 earnings estimates to 9 cents per share from 23 cents per share.
Shares fell 64 cents, or 10.4 percent, to $5.50 during afternoon trading on the Nasdaq Stock Market, having gone as low as $5.31 earlier in the session. A year ago the stock traded as high as $8.75, but dropped to a low of $5.19 in August 2006 before rebounding to end the year in the mid-$7 range. Since the start of 2007, however, the stock has lost about a quarter of its value.
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