NEW YORK — Based on Tuesday’s batch of first-quarter results from specialty and off-price retailers, consumers clicked with spring fashion sets, were lured to high-end accessories and were also drawn to activewear.

The Cato Corp., Dick’s Sporting Goods Inc., Gadzooks Inc., TJX Cos. Inc., United Retail Group and Zale Corp. reported quarterly results. Dick’s, TJX and Zaledelivered net income gains on higher year-over-year sales.

Edmond English, president and chief executive officer of TJX, which posted a 48.1 percent net income gain to $168.1 million, told Wall Street that earnings benefited from new fashion trends in spring product offerings.

“Strong comp sales increases were driven by enthusiastic customer response to our great values on fresh spring women’s apparel,” said English. “It’s exciting to see what appears to be a return of fashion in the apparel market.”

Management’s focus on carrying less inventory and buying later rather than sooner translated into better margins for the quarter.

In a preview of TJX earnings, Bear Stearns analyst Dana Telsey said, “Buying ‘closer to need’ has been beneficial in terms of merchandising and margin gains.” However, Telsey questioned whether this performance was sustainable given broader trends. “With compelling sourcing deals remaining available in the market, and mainstream department stores becoming less promotional on competitive brands, are the recent merchandise margin gains realized sustainable during 2004?”

Meanwhile, a 23.1 percent rise in earnings from Zale showed once again that consumers’ taste for luxury has yet to wane.

Mary Forte, president and ceo, said during the company’s conference call that the average ticket price at the company’s high-end Bailey Banks & Biddle segment grew 16 percent to $1,086.

“This increase was driven by the strengthening bridal category as the quality and merchandise assortments continue to improve,” said Forte. “The bridal business will be further boosted in the fourth quarter with the introduction of the Vera Wang bridal jewelry collection in select stores.”

At a time when other specialty retailers are seeing a teen market rebound, bankrupt Gadzooks continues to struggle as it repositions itself in targeting the 16- to 22-year-old female demographic. Sales and earnings plummeted as the company closed 158 locations since the end of January. Management hopes to rebuild its business and market position around its remaining 252 stores, but said there was no guarantee it would not need to shutter more locations.On the active and outdoor specialty retail front, Dick’s posted a double-digit rise in sales, pushing the company to a 63.6 percent earnings gain.

During the company’s conference call Edward Stack, chairman and ceo, said apparel had performed “extremely well” across all categories for the quarter.

“Under Armour continues to be just so important in the marketplace today, driving the apparel business,” said Stack of the retailer’s microfiber apparel brand.

Athletic footwear also proved to be a strong seller, signaling a “transition in athletic footwear to performance technology as opposed to the fashion component of athletic footwear over the last several years,” said Stack.

— Ross Tucker

First-Quarter Results
(in millions)
Earnings (loss) '04
Earnings (loss) '03
% change
Sales '04
Sales '03
% change
Source: Company reports

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