Nomura Sees Rough Q4 For L Brands, Michael Kors And More Specialty Retailers

Specialty retailers dependent on shopping malls could be facing a fourth-quarter watershed of bad news, an analyst said Monday.

A myriad of reports suggest the segment had a weak October "and we haven't even gotten to the holidays yet,' Nomura's Simeon A. Siegel said in a note. "There's no question mall challenges persist."

Cutting his earnings estimates on more than a half-dozen players, Siegel said the current period is "likely becoming a headache quarter for years to come."

Siegel sees some holiday hope for Signet Jewelers Ltd. SIG and L Brands Inc LB based on an "ability to drive their own traffic."

Underlying demand could benefit Michael Kors Holdings Ltd KORS and Kate Spade & Co, KATE while Abercrombie & Fitch Co. ANF might succeed in pleasing investors by jiggering its spending structure and thus boosting its profit margin.

For those "adventurous enough," Chico's FAS, Inc. CHS might squeeze some gains with "strict inventory discipline," Siegel said.

Still, Siegel lopped about 5 percent from his 2014 earnings estimate for Abercrombie & Fitch and about 1 percent from his L Brands estimate 2014 estimate and from his 2015 estimate on Chico's.

Siegel didn't immediately offer estimates on Kors or Kate Spade, but made cuts of a similar magnitude on earnings estimates for a half-dozen other specialty retailers. Those included American Eagle Outfitters, Aeropostale, Ann, Francesca's Holdings, The Gap and Urban Outfitters.