By  on November 30, 2005

SUFFERN, N.Y. — Never flashy, never pricy, The Dress Barn Inc. is proof that in the fickle fashion world, sometimes it pays to play it safe.

While profiting from a reengineering of stores and merchandise and its purchase of the Maurices chain last January, the 800-store Dress Barn chain hasn't moved away from its middle-class, moderate price appeal and niche in America's strip and power centers. It's been a steady player on that turf for decades, and one of the few remaining off-the-mall fashion specialty retailers. Brooks Fashions, Petrie, Ames and Bradlees have come and gone, replaced by Wal-Mart, Target and Kohl's, while Casual Corner is liquidating.

And Dress Barn is thriving in the environment. Today, the retailer will report net earnings for its first quarter ended Oct. 29 increased 187 percent to a record $20.4 million, or $0.64 per diluted share, compared to $7.1 million, or $0.24 per diluted share in the year-ago quarter. Comparable-store sales increased 9 percent for the 13-week period and 10 percent in November.

Furthermore, the company cited improved margins and raised its earnings guidance per diluted share for the full fiscal year ending July 29, 2006 to $1.90 to $1.95, from previous guidance of $1.60 to $1.65. The company expects comp store increases of around 4 percent for the remainder of its fiscal year.

For the year ended July 30, 2005 comps increased 5 percent, including Maurices, while net earnings increased 70 percent to $52.6 million.

Lately, Dress Barn Inc. has been raising its profile. It's developed an appetite for acquisitions, with the $320 million purchase of Maurices, bringing the combined business to $1 billion in sales. Also, the retailer has been advertising in lifestyle magazines for the past two years after always relying on newspaper inserts. The logo for the Dress Barn division shifted from vivid red to a more sophisticated, softer blush two-and-a-half years ago, and more recently began appearing in direct mail pieces and in stores as the one-word "dressbarn." Maurices' logo has changed to "maurices."

Long known for off-price and out-of-season branded goods, the stores now strive to be on trend, this season promoting items such as lace trim camisoles worn under jackets and fake-fur collars on cardigans, all under the Dress Barn label."We are not your mother's Dress Barn anymore," said David R. Jaffe, president and chief executive officer, during an interview at the chain's headquarters here. "We have created a brand with an image, and are no longer just a store."

"We are appealing to a fashion customer. Five or six years ago, Dress Barn wasn't on her radar screen," added Keith Fulsher, senior vice president and general merchandise manager. "We always had good quality, but the fashion was a little stale. We are now offering a fashion and value alternative."

Dress Barn, founded in a horse stable in Stamford, Conn., in 1962 by Jaffe's mother, Roslyn, began by selling designer-label wool pencil skirts, sheer blouses, flares, furs and leather coats at a discount. The Jaffe family maintains a controlling stake in the company.

The off-price formula continued for decades, but assortments grew tired and disorganized. About five years ago, Dress Barn saw the need for change, and started shifting to a vertical structure, sourcing goods and getting them manufactured under the Dress Barn label, rather than buying off-price. Currently, Dress Barn's inventory is 98 percent private label.

By cutting out middle men, value pricing has been maintained and there are more embellishments, details and natural fibers built into the assortment. In addition, the assortment has been expanded in the last few years with such categories as fashion jewelry, shoes and special sizes.

Despite the chain's name, dresses are not ubiquitous. For fall, they represented less than 10 percent of the assortment; for spring, dresses will be more than 20 percent. The sweet spots, price-wise, remain $24.99 to $39.99 for tops, $29.99 to $44.99 for bottoms and $49.99 to $59.99 for jackets. It's traditional fashion, with a bit of embellishment and occasional flash, that encourages wardrobing by often offering the third item in a three-piece outfit at a discount.

"It's very value-priced for a mainstream middle-class customer. That's how Dress Barn differentiates," noted Arnold Aronson, managing director of retail strategies at Kurt Salmon Associates.

About 40 percent of the 800-unit Dress Barn chain has been renovated, and eventually the majority will be, Jaffe said. Converted units have a more even balance between price promoting, displaying outfits and graphics, and are segmented by casual and career looks on each side of the main aisle. They're further segmented by four or five groups with different color stories. Each grouping has a feature wall anchored by a poster."We pull together stories that we want to represent, and it all starts with color. We still haven't walked away from talking value, but we don't have to scream price," Fulsher said.

"Our best customers come seven times a year on average," said Vivian Behrens, senior vice president and chief marketing officer.

Dress Barn's Maurices division, based in Duluth, Minn., has an even lower national profile than Dress Barn. It was owned by the secretive Dutch firm Brenninkmeyer, whose U.S. retail holdings included Ohrbach's, Steinbach's and Upton's and were dissolved in the Nineties after years of mediocrity.

"A lot of East Coast people have never heard of Maurices," Jaffe acknowledged. "But it diversifies us. We target 35- to 55-year-olds, they are in the 17-to-34 age group. We are East Coast dominant, they are Midwest and in smaller markets. Dress Barn is more national, and more conservative in style, while Maurices is trendier and clubbier in appeal."

In October, Maurices opened its 500th store in Grafton, Wis., and the expansion will accelerate under Dress Barn's ownership. "It's an easy double," Jaffe said, meaning Maurices could operate 1,000 stores. He noted that competitors such as Cato and Fashion Bug have more than 1,000 stores each. While Maurices is seen opening about 60 stores a year for the next three years, Dress Barn is targeting 40 to 50 a year.

"Maurices is not a turnaround. The team in Duluth has stayed," Jaffe said. The two divisions essentially operate independently, with Jaffe and just a few of his top executives spending about a week a month at Maurices, with only certain back-office areas consolidated. After a strong year, Dress Barn was able to pay off $100 million in senior debt borrowed to fund the acquisition, though the company still has some convertible debt.

With Maurices relatively easy to assimilate, and a lot of other retail properties up for sale, Dress Barn could make another deal, though Jaffe has strict criteria. It would have to be a chain that's off-the-mall and healthy. "We are not seeking something that has problems," Jaffe said. He did stress that Dress Barn "is not a mall player," though Maurices does have about 35 percent of its stores in malls. Officials from both divisions said they like to have stores near a Wal-Mart because the discounter drives traffic.Maurices, which generates about $350 million in annual sales, operates primarily in markets with populations from 25,000 to 100,000, whereas Dress Barn operates in markets of 100,000 and greater. Among the key items at Maurices lately are dressy embellished camisoles priced at $18 to $22, screen T-shirts for $14 and fleece sweatshirts priced at $28. About 90 percent of the merchandise is private label.

"By being part of the Dress Barn family, we will be a bit more aggressive with growth," said Maurices' top official, Lisa Rhodes, executive vice president and general merchandise manager. But she added, "From a strategic standpoint, our mission remains very much on course."

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