WASHINGTON -- Up until two years ago, Merry-Go-Round Enterprises Inc. was one of the hottest young fashion retailers, dictating trends like the leather bomber jackets inspired by the movie "Top Gun" and sexy beaded bustiers for Madonna wannabes. Now,...
WASHINGTON -- Up until two years ago, Merry-Go-Round Enterprises Inc. was one of the hottest young fashion retailers, dictating trends like the leather bomber jackets inspired by the movie "Top Gun" and sexy beaded bustiers for Madonna wannabes. Now, the Joppa, Md.-based retailer has become the latest fashion victim.
After an unsuccessful attempt at restructuring its loan agreements, the retailer, which operates 1,450 stores in 44 states, filed a Chapter 11 petition to reorganize on Jan. 11. The filing came on the heels of its dismal showing during the holiday season -- a 16 percent drop in same-stores sales. In its worst period yet, Merry-Go-Round, which operates under such names as Merry-Go-Round, Attivo, Dejaiz and Cignal, recorded a $38.5 million loss in its third quarter ending Oct. 30, 1993. That included a $35 million charge for inventory writedowns, in particular its slow-moving hip-hop items, and costs for closing about 80 stores.
While analysts say that the company's fall isn't permanent, it illustrates how a competitive environment, along with a few bad merchandising bets, could make a once-hot company cool off with its young customers so fast.
"The young market has changed, and apparently Merry-Go-Round wasn't changing with it. It was becoming reactive, rather than proactive," said Peter Schaeffer, partner at Johnson Redbook Service, a New York-based retail and apparel research firm.
A major problem for Merry-Go-Round, which hit $877.4 million in sales for fiscal 1993, is the customers themselves. Shunning malls in favor of foraging for ripped jeans at vintage shops, this new breed of teenagers has been particularly cruel to Merry-Go-Round as well as other mall-based young trendy chains, such as those operated by St. Louis-based Edison Brothers Inc., Santa Ana, Calif.-based Pacific Sunwear and Irvine, Calif.-based Wet Seal, which have all reported lackluster sales in the past year.
Carol Farmer, who owns a Boca Raton, Fla.-based consulting firm bearing her name, said, "Unlike the baby boomers when they were younger, this new generation is not idealistic. They look at life as one big cafeteria. They have more options beside the mall. They're great cruisers and pickers, shopping at thrift stores."
A Stella McCartney sketch of a custom dress made from protein-based silk in partnership with biotech lab Bolt Threads. The dress will be displayed at The Museum of Modern Art's upcoming design exhibition, "Items: Is Fashion Modern?"