NEW YORK — Two of the hottest hands in apparel retailing Tuesday ushered in this week’s reports on same-store sales with top-notch results that, while probably not typical, were unquestionably encouraging.
This story first appeared in the July 9, 2003 issue of WWD. Subscribe Today.
Continuing to defy the assumption that double-digit comparable-store sales increases are a thing of the past, Chico’s FAS checked in with a 16.5 percent comp increase for the month, as overall sales skyrocketed 41.7 percent to $65.9 million, while the more youthfully oriented Pacific Sunwear of California saw its comps swell like a post-storm surf, gaining 13.4 percent as overall sales bounded 22.2 percent to $89.6 million.
Both advances came on top of double-digit comp gains in June 2002 and sent the companies’ stocks to new 52-week highs. Chico’s roared to the New York Stock Exchange’s finish line, closing up at $2.83, or 12.8 percent, at $24.93 after hitting $25.82 in intraday trading. On the Nasdaq, PacSun briefly hit $28.35 before settling in at $28.28, up $1.88 or 7.1 percent.
They also helped to lift the market capitalizations of other retailers in the process. The Standard & Poor’s Retail Index rose 2.5 percent, to 343.94, as the Dow Jones Industrial Average and the S&P 500 managed increases of just 0.1 percent and 0.3 percent, respectively.
Both Chico’s and PacSun were able to drive sales by sticking to their own unique business plans — Chico’s, by reaching out to an underserved misses’ market and an effective loyalty program, and PacSun, by offering its teen customers the brands they crave.
The two companies released their monthly sales tallies earlier than the rest of the industry because of their participation in the CIBC World Markets Consumer Conference in Boston. The majority of U.S. retailers are expected to report results on Thursday.
PacSun, based in Anaheim, Calif., said its 13.4 percent comp increase came from a 12.5 percent rise at PacSun stores and a 23.1 percent jump at Demo. Comps improved by double digits in each week. Women’s did best at the PacSun stores, but footwear and accessories also registered double-digit comp gains. Its young men’s business posted a 1.4 percent comp increase, and although the most sluggish unit, it is still outperforming industrywide weakness.
Top sellers for young women were short-sleeved T-shirts, tanks, sweatshirts, wovens, shorts and pants, while the young men’s showed strength in sweatshirts, T-shirts and denim pants.
At Demo, girls’ and accessories again led the business with comps up strongly in double digits while the men’s business posted a less powerful but still double-digit comp increase.
Carl?Womack, chief financial officer, said on a prerecorded conference call that merchandise margins for May and June were higher than last year. PacSun also notched up second-quarter guidance by 3 cents to 23 cents for the three months ended July 1. Last year, PacSun reported diluted earnings per share of 15 cents.
Chico’s, headquartered in Fort Myers, Fla., said of its 16.5 percent comp gain that a strong response to the company’s July catalog in the fourth and fifth week of June lifted comps more than 30 percent during those weeks. Comps increased in the low-double-digit range in the first and second week, but were down in the low-single digits in the third week.
The company said it expects comps to be at least in the high-single-digit range in July.
Raising her earnings estimates for both PacSun and Chico’s, Lauren Levitan, a retail analyst with SG Cowen, said both companies’ results were very impressive. “There is the tough environment out there,” she commented. “Yet it is still possible for companies to outperform.”
In a telephone interview, Pat Murphy, Chico’s chief merchandising officer, said of the store’s customer: “I think she knows that we never let her out of our sight. It is about focus and seeing what she is doing with her life and hearing what she has to say. No one needs to buy clothes, but she has to see something she can’t resist and so hopefully we can keep her excited. It is really all about being able to find something fresh and new.”
Murphy said the company is selling a lot of its merchandise at regular price and noted color and novelty have been selling well, helping the stores look fresh and inviting.
“No one has the luxury of four different closets in her house. I think we are really trying to pay attention to the whole thing — tops that work with bottoms, and color and proportions that work together.”
Additionally, Mothers Work, the Philadelphia-based maternity retailer, said its comps in June slipped by 0.6 percent, but noted that June’s results were hampered by the fact that this year’s month had one less Saturday than last year’s.
Rebecca Matthias, president and chief operating officer, said that comps for the May-June period, encompassing nine Saturdays in both years, were up 2 percent. The company noted it now expects to meet or exceed the high end of its previous third-quarter earnings guidance of $1.35 to $1.45 a share. The firm is scheduled to report results for the quarter ended June 30 on July 22.
Last month, the maternity retailer retained The Joester Loria Group, a licensing and marketing agency, to expand the Motherhood Maternity brand beyond apparel and to bring a new subbrand, Motherhood Baby, into baby-related categories such as diapers, strollers, baby food and apparel.
“We see more than 2.5 million of the 4 million pregnant mothers each year,” Matthias said in a recent telephone interview. “We have intense relationships with them for six months and they come to know our brands in a very intimate way. We also know our customers go on and buy other baby-related products and we want to continue that relationship by extending the brand into other products, which is also a great way for manufacturers and other retailers to have access to our customers.”
The licensing and marketing program for the MW brands will be available in all retail channels. The firm operates 972 maternity locations, including 821 stores and 151 leased departments, under the nameplates Motherhood Maternity; A Pea In The Pod, and Mimi Maternity. MW leases space from Federated Department Stores, Babies ‘R’ Us and other retailers.
The Motherhood Baby program will include product for newborns to 2 years old, and will target a broad range of retail outlets. Motherhood and Motherhood Baby products are expected to roll out nationally starting in fall 2004.