NEW YORK — Factory 2-U Stores managed to narrow its third-quarter loss despite wildfires, labor strikes, a purge of field management and what its chief executive termed other “acts of God and men.”

This story first appeared in the November 17, 2003 issue of WWD. Subscribe Today.

Concurrent with its earnings announcement last week, the San Diego-based store said A.J. Nepa had joined the firm as executive vice president and general merchandise manager. Nepa assumes merchandising duties that had been handled by William Fields, chief executive officer, on an interim basis. Nepa most recently served as merchandise manager for Forman Mills.

For the 13 weeks ended Nov. 1, the beleaguered off-price retailer recorded a loss of $3 million, or 17 cents a diluted share, beating Wall Street’s consensus estimate of a 19 cent loss. Comparatively, the company reported a loss of $3.5 million, or 27 cents a share, in last year’s quarter.

Top-line trends weren’t encouraging, however. Sales for the period receded 9.4 percent to $121.9 million against $134.5 million in last year’s like period.

Comparable-store sales declined 6.9 percent during the quarter, widening from a 5.6 percent decline last year.

“Hopefully we don’t have any more acts of God and men to contend with,” said Fields during the company’s conference call when referring to the negative impact of the California wildfires and labor strikes during the quarter.

More to the point, perhaps, were depressed apparel sales across the board, ultimately keeping the company in the red. “We definitely had an issue with sales of apparel,” said Fields during the call.

Sales in the ladies segment were down 14.1 percent, misses’ and juniors were down 21 percent and girls were down 6 percent. Men’s and young men’s apparel sales were down 12.4 percent and 15 percent, respectively. Boys’ wear sales were down 19 percent.

Fields — who had previously served stints as ceo of Wal-Mart’s flagship division, Blockbuster Entertainment Group and Hudson’s Bay Co. — is marking his one-year anniversary at the helm of Factory 2-U. His efforts to turn the once-hot off-price operation around have been hindered by major changes in operations and personnel.

According to Fields, all three divisional managers, between 90 and 95 percent of district managers and two-thirds of store managers have been changed during his tenure. “To operate up to our standards we’ve had to make some fairly dramatic changes,” he said. “I didn’t think we would have to make that dramatic a change in the field organization. We’re not there yet.”

For the year to date, the company reported a loss of $11.1 million, or 71 cents a diluted share, compared with a loss of $12.5 million, or 97 cents, last year.

Sales for the period were down 7.8 percent to $349.9 million from $379.5 million last year.

Factory 2-U operates 243 stores in 10 states in the West and Southwest. Of these, 128 are in California, divided between the northern and southern halves of the state.

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