GADZOOKS WINS WITH BRANDS, DEB SHOPS BETS ON FASHION

Byline: Thomas J. Ryan

NEW YORK — A renewed focus on mainstream brands drove strong holiday results at Gadzooks Inc. while a successful search for the right trends among a plethora of smaller resources pushed up earnings at Deb Shops.
Gadzooks, based in Dallas, Tex., earned $3.7 million, or 42 cents a share, in the fourth quarter, rebounding from a $898,000 loss a year ago. Sales ran up 17.6 percent to $75.6 million, with same-store sales ahead 11.3 percent.
Earnings in the quarter came despite charges of $783,000 tied to the closing of eight stores and $533,000 for the impairment of long-lived assets at six other stores. The teen casual-apparel chain currently has 325 stores.
“We’re back in the branded business, and it’s working well,” said Jerry Szczepanski, chairman and chief executive, in a conference call.
“Every group has performed at double-digit comps except for shoes, and shoe is continuing to trend positive and going in the direction we want it to. Men’s, juniors, accessories and T-shirts have been absolutely wonderful.”
The stores are now stocked with brands including Hurley, JNCO, Mudd, No Fear, Fox Racing, Ecko, Mossimo, Guesswear, CK Calvin Klein and XOXO.
Richard Jaffe, an analyst at PaineWebber, said Gadzooks lost many of its core customers when it brought in some trendy, lesser-known brands. It now appears to be reaping the benefits of refocusing on national brands.
“Gadzooks is more of mainstream business, with most stores located in malls throughout the central part of America. And looking back, the assortments had grown much edgier and fashion-forward than was appropriate for the market and for the brand,” said Jaffe.
In the nine months, earnings surged to $6.07 million, or 67 cents a share, from $387,000, or 4 cents, a year ago. Sales moved ahead 16 percent to $241.6 million, and 5.4 percent on a same-store basis.
Deb Shops, based in Philadelphia, reported earnings rose 26.3 percent to $11.1 million, or 82 cents a share, from $8.8 million, or 66 cents, a year ago. Sales ran up 8.5 percent to $43.7 million.
On a conference call, Lewis Lyons, chief financial officer, said Deb benefited this holiday from several fashions themes, including hippy screen-prints, dressy tops and bottoms, tie-back and back-less looks, wide-legged denim, polar fleece vests and jackets, animal prints and clubwear. Tank tops were “excellent” and pajamas were “very good,” Lyon said.
“We are now well into the first quarter and are seeing many similar trends. The business is jeans driven and back-less and dressy looks continue to be strong performers. Heading into spring the business is trending toward bright colors such as fuchsia, oranges and yellow as well as some pastels,” Lyons said.
Lyons said Deb primarily uses smaller resourses, except for L.E.I., Mudd and Paris Blues in jeans. Deb will focus on layering assortments together to drive multiple purchases, but plans to maintaim price points in line with its goal of making Deb a destination store.
Deb remodeled 14 of its 285 stores last year and saw sales increase on average about 18 percent.
A similar number will undergo remodels this year. Seventeen new stores opened last year, and between 10 and 20 are slated for 2000.
In the year, profits surged 57.8 percent to $24.5 million, or $1.81 a share, from $15.5 million, or $1.17, a year ago. Sales increased 8.2 percent to $177.4 million.

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