TOO NET UP, NEW TEEN CONCEPT PLANNED
Byline: Melanie Kletter
NEW YORK — Aided by higher margins, Too Inc., the operator of Limited Too stores, reported fourth-quarter earnings grew 20.9 percent despite a slight dip in same-store sales.
The company also revealed that it will test a new retail concept aimed specifically at teenage girls, a slightly older group than it targets with Limited Too. On a conference call Wednesday, Michael Rayden, Too’s chairman and chief executive officer, said it will be called Mish Mash and will roll out with a handful of stores for the 2001 holiday season. He declined to give other details.
“We are moving into the next age group and we will use the same fully integrated strategy that we use with Limited Too,” Rayden said on the call.
The news sent Too’s stock soaring nearly 8 percent to close at $18.25 on the New York Stock Exchange, despite dramatic setbacks in the overall market.
In the quarter ended Feb. 3, Too’s earnings grew to $20.8 million, or 66 cents a diluted share, from $17.2 million, or 55 cents. Results exceeded Wall Street expectations by 2 cents.
Sales in the period grew 18.6 percent to $184.1 million from $155.2 million, aided by new store openings as well as an extra week of selling time compared to last year. The company said its 1 percent same-store sales dip was smaller than had been expected. Top performing merchandise categories included activewear and cut and sewn casual tops, the company said on the call.
Rayden said the comp-sales decrease was a “disappointment” but said overall the company “had a great quarter in a challenging retail environment.”
Looking ahead, Rayden said total sales are projected to be up about 15 to 20 percent this year, despite low single-digit comp sales projection increases, while gross margin rates for the first and second quarters of 2001 will decline slightly due to increased catalog mailings. General, administrative and store operating expense rates should improve “somewhat.”
During the quarter, Too added 17 new stores, remodeled two and closed two, and it plans to add between 50 and 55 new stores this year. In total, it now operates 406 stores under the Limited Too banner. The company also sells merchandise over its Web site, limitedtoo.com, and through its catazines, which combine the formats of catalogs and magazines.
On the merchandise end, the firm said it is increasing its investments in shoes, which have been a “major category” since being tested last year. It has also narrowed its selection “slightly” in tops and bottoms and has put more depth in key items, particularly activewear such as graphic T-shirts. The tops area “continues to be on fire,” Rayden said. Spring selling so far is off to a good start, he noted.
On its Web site, the firm plans to introduce “My Virtual Model,” a technique which allows users to virtually try on clothes and also get shopping advice. A number of promotions and special shopping coupons are planned to help build store traffic, including the expansion of a frequent buyer program. The Limited Too credit card, launched in September, has seen early success, Rayden noted.
In regards to its new concept, Too will now be looking for growth in a market already flooded with many players, including Wet Seal and Limited Express, owned by Too’s former parent, Limited Inc. It will especially bump heads with Wet Seal, which recently purchased Zutopia, one the Limited Too’s main competitors in the tween arena, since both will have concepts aimed at both tweens and teens.
For the year ended Feb. 3, earnings gained 31.2 percent to $32.2 million, or $1.02 from $24.6 million, or 79 cents. Sales gained 21 percent to $545 million from $450.4 million, and were ahead 4 percent on a same-store basis.