The Rouse Co. reported a strong first quarter yesterday, but recent signs of flagging retail sales could make it tougher for the Columbia-based owner and manager of 75 shopping malls to keep up the pace.
Rouse's earnings before depreciation and deferred taxes reached $23.1 million for the first quarter of 1995, up 14 percent from the same period a year ago. That number is considered the best gauge of Rouse's performance, because net income figures for real estate companies are skewed by depreciation expenses.
Revenue was flat in the quarter, at $162.5 million.
Cathy Creswell, who follows real estate companies for Alex. Brown & Sons Inc. said she was pleasantly surprised by the company's quarterly financial performance, which came after two years of record earnings for Rouse.
"This was a very good quarter for them," Ms. Creswell said.
Net income worsened to a loss of $7.8 million, or 24 cents per share, compared with a loss of $2.7 million, or 13 cents per share, in the comparable 1994 quarter. Most of the first-quarter's loss this year was due to a $7.2 million early repayment penalty on its indebtedness for the Owings Mills retail center. Rouse said it expects the refinancing to save the company about $2.5 million a year.
Ms. Creswell said many investors have worried about Rouse because of recent reports that retail sales -- especially those of women's clothing retailers, which take up a significant share of Rouse's mall space -- have turned sluggish in recent weeks.
Rouse' stock, which fell about $2 in early April to a trading range of about $17, has since started to recover, she noted. It closed unchanged after the earnings announcement yesterday, at $18.75.
Ms. Creswell said investors are returning to Rouse stock because the company is successfully renting its new mall spaces at higher rates and is reducing its costs by refinancing its debt.
"The outlook for now is good. It will be a while before a recession would hit them," Ms. Creswell said. Eventually, however, a retail slump "will catch up with them," she warned.
David L. Tripp, spokesman for Rouse, said the company is "delighted with our results. They are terrific."
He said he doesn't expect the recent downturn in retail sales to affect Rouse's financial performance any time soon.
"Right now, retail sales are bleh, but we have 10-year leases," which evens out the short-term bumps in the retail sector.