FASHION STOCKS STUNG IN ’94
Byline: Thomas J. Ryan
NEW YORK — Fashion stocks were routed in 1994 as the overall WWD stock index tumbled 14.4 percent.
That compares with a 2.1 percent gain in the Dow Jones Industrial Average and a 1.5 percent dip in the Standard & Poor’s 500-stock index.
Losers on the WWD stock index more than doubled gainers, 47 to 19. The declines marked the second year in a row of sluggish performance by fashion stocks. In 1993, the WWD index fell 7.5 percent.
Weakness was seen across all categories. Many stocks began sliding later in the year as it became apparent that a hoped-for turnaround in apparel wasn’t occurring. Poor weather and strong demand for hard goods items such as furniture and computers, as well as houses and cars, muted any chance for a rebound in apparel sales.
The hardest hit category was off-price apparel retailing, which tumbled 42.5 percent as a group in 1994 due to intense competition on all fronts: price lowering strategies by department stores, upgraded apparel offerings by discounters and the increasing popularity of outlet stores. As a result, all suffered earnings disappointments.
Among the casualties were TJX Cos., dropping 46.4 percent to 15 5/8; Filene’s Basement Corp., plunging 57.5 percent to 4 5/8; Burlington Coat Factory Warehouse Corp, dropping 48.1 percent to 11 7/8, and Value City Department Stores Inc., which lopped off 40.2 percent to 8 3/4.
Discounters also took it on the chin, losing 17.5 percent as a group, due in part to severe pressure on margins from poor apparel sales.
Venture Stores Inc. fell 50.3 percent to 11 5/8 as the chain posted a 90 percent decline in nine-month profits. Kmart Corp., which blamed poor apparel sales for subpar results in 1994, fell 39.5 percent to 13 and announced plans to sell off its non-core businesses to concentrate on the turnaround of its discount division.
Wal-Mart Stores Inc. gave back 15 percent to 21 1/4, Family Dollar Stores Inc. dropped 26.5 percent to 12 1/2, Bradlees Inc. was off 13.1 percent to 11 5/8 and Caldor Corp. lost 12.8 percent to 22 1/4.
The specialty store group was off 14.9 percent, with Spiegel Inc. tumbling 55 percent to 10 1/8, Charming Shoppes Inc. losing 44.2 percent to 6 5/8, and Woolworth Corp. plunging 40.9 percent to 15. All these chains were hurt by sluggish sales.
Other notable decliners were The Gap Inc., sliding 22.5 percent to 30 1/2 and Neiman Marcus Group, fell 28 percent, from 18 3/4 to 13 1/2. The Gap was hurt by slowing sales growth at its Gap chain while Neiman Marcus continued to struggle with Contempo Casuals.
Merry-Go-Round Enterprises Inc., which filed for bankruptcy protection in January, closed at 1 versus 3 1/4 at the end of 1993. (Merry-Go Round could be out of bankruptcy by June. For more, see page 19.)
Bucking the trend, strong earnings momentum helped Ann Taylor Stores Corp. jump 38.9 percent to 34 3/8 and The Talbots Inc. move ahead 17.9 percent to 31 1/4. Ann Taylor’s profits doubled in the nine months while Talbots’ nine-month earnings grew 27.6 percent.
The department store category, which was the top WWD performer in 1993, fell 10.4 percent in 1994.
Dillard Department Store Inc. felt the sharpest blow in the group, dropping 29.6 percent to 26 3/4. Dillard’s reported a slim 2.1 percent increase in earnings in the nine months as excessive markdowns in women’s apparel eroded margins.
Also declining were Broadway Stores Inc., by 22.4 percent to 7 3/8; Kohl’s Department Stores, 20.9 percent to 39 3/4; J.C. Penney Co. Inc., 15.2 percent; May Department Stores Inc., 14.3 percent; Sears Roebuck & Co., 13 percent; and Federated Department Stores Inc., 7.2 percent. Going against the grain, Bon Ton Stores Inc. and Carson Pirie Scott & Co. climbed more than 30 percent on strong earnings. Dayton Hudson Corp., which racked up a 60 percent hike in earnings in the nine months, tacked on 4 1/8 points to 70 3/4. Mercantile Stores Inc. gained 3 1/4 points to 39 1/2 on a 30 percent increase in profits in the nine months.
Meanwhile, the apparel manufacturers as a group suffered the least among the groups on the WWD index, slipping 4.9 percent for the year. Earnings shortfalls caused shares of Garan Inc. to tumble 50.4 percent to 16 1/4 and Phillips-Van Heusen Corp. to collapse 59.3 percent to 15 1/4.
Liz Claiborne Inc., which has been struggling to turn around its core women’s sportswear lines, continued its descent, falling 24.9 percent to 17. Claiborne had been as high as 42 7/8 in 1993 before its recent problems surfaced. Leslie Fay Cos. Inc., which filed a Chapter 11 petition in April 1993. closed at 69 cents at yearend versus 3 1/4 at the start.
Other decliners included Jones Apparel Group Inc., shedding 13.8 percent to 25 3/4; Kellwood Corp., falling 21.3 percent to 21; and Chic by His Inc., losing 24 percent to 9 1/2.
On the upside, Bernard Chaus Inc. doubled to 5. The stock began to take off in September after Chaus unveiled plans to name Andrew Grossman, former president of Jones Apparel Group, as its chief executive officer.
St. John Knits Inc. gained 23.1 percent to 28 5/8 while reporting profits advanced 35.1 percent in its fiscal year ended Oct. 31. Shares of Tommy Hilfiger Corp. jumped 44.4 percent to 45 1/8. Hilfiger’s profits skyrocketed 71 percent in the six months ended Nov. 30.
Some activewear makers were boosted by improvement in the T-shirt and fleece markets. Fruit of the Loom Inc. added 2 7/8 points to 27 and Russell Corp. tacked on 3 1/3 points to 31 3/8. Other gainers in the apparel group were Warnaco Group, adding 13.6 percent to 17 1/4, and VF Corp., up 5.4 percent to 48 5/8.
The textile group lost 15 percent. Textile mills generally saw improved demand, but higher raw material costs — particularly in cotton and wool — damaged the bottom line. The biggest percentage decliners were Forstmann Inc., 56.5 percent to 5; Burlington Industries Inc., 36.3 percent to 9 7/8; Cone Mills, 29.6 percent to 11 7/8; Dixie Yarns Inc., 33.3 percent to 7, and Texfi Industries Inc., 31.3 percent to 2 3/4. Galey & Lord Inc. inched up only 2.4 percent to 22 1/4 despite chalking up a 41 percent profit gain in its year ended Sept. 30.
Meanwhile, the market for initial public offerings fizzled in 1994, with only eight fashion issues reaching the market versus 16 in 1993 and 24 in 1992.
In addition, a number of firms, citing bleak market conditions, withdrew offerings.
The big IPO winner in 1994 was Kenneth Cole Productions Inc., which reached the market at 12 in June and closed the year at 21. Among other notable IPOs was Norton McNaughton Inc., which reached the market at 14 in February and closed 1994 at 15 1/4. American Eagle Outfitters Inc. came to market at 16 in April, rose as high as 29, but ended the year at 13 1/4. Marisa Christina Inc. began trading in July at 13, and closed the year at 10 3/4. — Fairchild News Service