Beginning with the back-to-school season, the 441-unit specialty store will eliminate all men’s merchandise and reinvent itself as a retailer of women’s apparel and accessories only. While details about the new merchandising alignment haven’t been released, analysts and retail observers expect the chain to focus on juniors.
Gadzooks chief executive Jerry Szczepanski said Thursday, "This was not a decision we made based on current trend," but one designed to reverse "eroding comps and earnings" and to position the chain to be a "competitive force for the next 10 years."
Szczepanski co-founded the firm in 1983 and built it into a 441-unit chain with stores in 41 states. "But the strategy that worked 20 years ago is a tired strategy," he admitted.
The stores will be closed for several days prior to b-t-s to remove the remaining men’s merchandise and will reopen as exclusively women’s stores, sporting a new concept being developed by FRCH Design Worldwide and The Richards Group.
Gadzooks, which lost $856,000 on a same-store sales decline of 5.1 percent during the third quarter ended Nov. 2, saw comparable-store sales decline 1.2 percent in November and 2.4 percent in December. Last year, net sales rose 8.8 percent to $313.8 million. Women’s merchandise accounts for 55 percent of total sales.
The transition will lead to a 20 percent reduction in sales and a loss of 50 cents a share in the third quarter, according to chief financial officer James Motley, but the chain expects a small profit on a mid-teen sales drop for the final quarter of fiscal 2003.
Richard Jaffe, analyst with UBS Warburg, called the move "clearly a desperate effort, but they had to figure out some way to compete, and women’s is the business that has been performing the best for them."
Gadzooks stock closed down 65 cents, or 13 percent, at $4.34 in Nasdaq trading Thursday.
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