JDAS Drops 12%: U.S. Retailers Cutting Back On Spending

Shares of JDA Software Group (JDAS) are down $3.76, or almost 12%, at $29.04 in late trading after the company this afternoon warned that its expects Q4 revenue to come in below analysts’ expectations.

The company now sees revenue in the three months that ended in December of about $173 million, below the consensus $181.6 million. Total software revenue for the full year is now expected at $141 million, below the company’s original expectation for the year of $145 million to $160 million, leading to full-year revenue of $650 million to $690 million, which, at the mid-point, is below the average $677.5 million.

Moreover, EPS is expected “towerd the high end” of the existing forecast for $2 to $2.20 per share, which is below the average $2.23 per share estimate.

During a conference call with analysts, CEO Hamish Brewer said that the shortfall was a result of “an unexpected reduction in our software license revenue between North America, during the closing weeks of the fourth quarter,” and he speculated the reason is that despite a record holiday quarter among retailers, those retailers cut back on software investment to preserve profit given that they were already running thin on margins:

We saw an unusually large number of deals that stopped unexpectedly right at the end of the quarter. In some cases, we were well into or even through the contract negotiation process. This behavior is quite unusual [�] When I look at the license sales performance for manufacturing in North America, although with less than we expected, it was not dramatically lower than previous quarters. However, retail delivers a particularly soft quarter. As you have seen in the press I’m sure the — retailers announcing earnings records. I believe that many retailers put the brakes on all kinds of spending when they realized that margins were going to come in much lower than expected through the holiday period. As we know from the NRA is report total holiday sales were up over last year but it is my belief that much of this growth was at the expense of margin. [�] But I don’t think that retail is just struggling with cautious consumer spending sentiment, because this has been the case for some time. In addition, I believe it is quite possible that our retail customers faced issues with e-commerce, combined with the new smart phone and power of consumer. We know that online sales grew much faster than total sales, so this means that traditional brick-and-mortar talents — channels lost share.