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									Earnings Forecasts
Quarterly Earnings Predictions for Younkers and Carson Pirie Scott

Forecasts of earnings and other accounting variables are included in almost all reports by security analysts.
These forecasts range from short-term (e.g., one quarter or one year ahead) to long-term (e.g., five-year
earnings or sales growth rates). Both types of forecasts can prove useful in a variety of decision contexts.
Illustrative contexts include:

   An investment context where the aim is to detect misvalued securities or to maintain a well-diversified
    portfolio with a specific risk level.
   A credit lending context where the aim is to balance higher interest payments against the likelihood of
    bankruptcy.
   A divestiture context where the aim is to forecast the future earnings to be derived from a division of a
    company.

Security analysts forecasts of earnings can be obtained from both primary sources -- the reports issued by
individual analysts themselves -- and secondary sources -- the reports of services that collect and distribute
earnings forecasts made by analysts at many institutions.1 This case requires you to generate short-term
earnings forecasts for two retailers: Younkers and Carson Pirie Scott.




Company Background
Younkers is a leading fashion department store chain with 1994 sales of about $599 million. The company
was incorporated in 1856 and became a publicly traded company in April 1992. The company operates 53
stores in Iowa, Nebraska, Wisconsin, Michigan, Minnesota, South Dakota, and Illinois. Younkers’ stores
are generally located in mid-sized to smaller cities where Younkers is one of the primary department stores
and competition is more limited than in major metropolitan areas.


Carson Pirie Scott is the nation’s tenth largest department store chain, with over $1.1 billion in sales in
1994. The company was founded in 1889 and currently employs 14,000 people servicing 59 department
stores in four Midwest States. The company emerged from Chapter 11 reorganization in the fourth quarter
of fiscal 1993. The company operates under the names Carson Pirie Scott (36 stores), Bergner’s (13 stores)
and Boston Store (10 stores), with headquarters located in Milwaukee, Wisconsin. As a full-line
department store, Carson’s offers complete merchandise selections of apparel, cosmetics, accessories and
jewelry, shoes, housewares and home furnishings.




1
 Examples of secondary sources include Lynch, Jones and Ryan’s Institutional Brokers Estimate System
(IBES), Standard & Poor’s The Earnings Forecaster, and Zacks Investment Research’s Icarus Service.
Quarterly Earnings Data
Reproduced below is an excerpt from the 1994 annual report of Younkers that reports information about
quarterly sales, cost of sales, and earnings. Also reproduced below is an excerpt from the 1994 Form 10-K
of Carson Pirie Scott that reports information about quarterly sales, cost of sales, and earnings. Because
both companies use a January 31st year-end, the first quarter of 1994 ends on April 30, 1994 whereas the
fourth quarter of 1994 ends on January 28, 1995. Further details about quarterly earnings are contained in
the annual reports of each company.

Younkers Quarterly Financial Data (Unaudited)
Quarters ended       April 30, 1994      July 30, 1994           October 29, 1994      January 28, 1995
Fiscal 1994 (in thousands except per share data)
Net sales            $125,596            $125,297                $146,347              $210,895

Gross margin            43,634                46,511                51,612                71,587

Net earnings (loss)        199                   901                 2,588                 9,829

Earnings per share       $.02                 $.10                   $.28                 $1.07
Quarters ended       May 1, 1993         July 30, 1993           October 30, 1993      January 29, 1994
Fiscal 1993 (in thousands except per share data)
Net sales            $132,740            $126,815                $152,419              $185,921

Gross margin            50,026                45,833                55,869                66,256

Net earnings (loss)      1,062                 (1,449)               4,640                 8,009

Earnings per share         $.15                 ($.16)                 $.50                  $.86




Carson Pirie Scott Quarterly Financial Data (Unaudited)
Quarters ended       April 30, 1994      July 30, 1994           October 29, 1994      January 28, 1995
Fiscal 1994 (in thousands except per share data)
Net sales            $255,975            $235,406                $277,326              $392,905

Gross margin            90,636                87,155                99,756               138,705

Net earnings (loss)      2,818                 2,936                 4,593                39,905

Earnings per share       $.14                 $.14                     $.23               $1.97
Quarters ended                                                                         January 29, 1994
Fiscal 1993 (in thousands except per share data)
Net sales                                                                              $387,700

Gross margin                                                                             142,233

Net earnings (loss)                                                                       27,172

Earnings per share                                                                         $1.34
Required:

[1] Due October 20: Locate information about each company’s quarterly earnings performance for
the first and second quarters of 1995. Use that information to complete the “actual” columns of the table
below. Attach copies of the source documents that were used to identify actual earnings for each quarter
and company.


[2] Due October 27: Prepare third-quarter and fourth-quarter forecasts of sales, net operating
income, and net income per share for each company. Enter those forecasts in the table below. Be prepared
to describe and defend each of your forecasts and document the information sources used.




Fiscal 1995 Quarterly Sales and Earnings Forecasts
Quarters ended     April 29, 1995       July 29, 1995             October 28, 1995       January 27, 1996
                    (1: Actual)          (2: Actual)                (3: Forecast)          (4: Forecast)
Younkers (in thousands except per share data)
Net sales

Net operating
income

Net income per
share
Carson Pirie Scott (in thousands except per share data)
Net sales

Net operating
income

Net income per
share

								
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