SPECIALTY STORES DRAW STRONG GAINS WITH TRENDS
Byline: Thomas J. Ryan
NEW YORK — An abundance of fashion trends drove customers to many specialty chains this spring. Ann Taylor, Deb Shops, Charming Shoppes, Dress Barn and Venator proved that on Thursday by delivering solid first-quarter earnings gains.
A variety of fabrics, from silk to stretch, and silhouettes such as sleeveless and three-quarter lengths, tickled customer interests. Color in general was heartily embraced.
Claiming a position as a “color authority,” Ann Taylor announced plans to roll out cosmetics in 2001. A long-awaited resurgence for athletic looks led to better than expected improvement at Venator, Footlocker’s parent.
Missing trends was Urban Outfitters, with one analyst saying that chain’s hip fashions and streetwear looks just aren’t jibing with the current trend toward cleaner, dressier looks.
Ann Taylor Stores
Earnings sank 23.5 percent to $11.3 million, or 38 cents a share, from $14.8 million, or 51 cents, a year ago, stymied by a previously announced charge of $5.1 million, or 17 cents a share, to cover fees for financial and legal advisors. The fees were part of an extensive review to study various approaches to increase shareholder value, but Ann Taylor has not offered any further details.
Most analysts suspect that the charge was related to an acquisition possibility that the firm decided not to pursue. Excluding the charge, earnings increased 11.1 percent to $16.4 million, or 55 cents, and beat consensus estimates by two cents.
Sales rose 11 percent to $277.1 million. Same-store sales eased 0.5 percent versus a 16.9 percent rise in 1999.
“Although total sales in the first quarter were lower than our original expectations, as a result of the unseasonably cold and wet April weather, our improved merchandising and inventory management processes enabled us to achieve strong gross margins for the first quarter and increased earnings,” said chairman Patrick Spainhour. Strong sellers included chunky sleeveless sweaters, woven tops in various sleeve lengths and twin sets. Silk and color were strong as well. A resurgence is being seen in jackets, a category officials said typically drives multiple purchases.
The firm told analysts its cosmetics line will be tested in 60 stores this fall with over 150 stockkeeping units, and roll out to an additional 300 stores in 2001. The stores will also expand shoes and give petite and large sizes a better position in the store. Ann Taylor plans to launch e-commerce in Holiday 2000 or early Spring 2001.
Fernanda De Clercq, at Van Kasper Securities, said the rollout of Ann Taylor Loft, a more moderate-priced concept, is proceeding according to plan, and the firm is seeing even better expansion potential for the core Ann Taylor chain due to improved sales productivity.
Net earnings rose to $15 million, 11 cents a share, against a $3 million loss a year ago. Adjusted to exclude the disposition and operations of several businesses, earnings improved to $23 million, or 16 cents, against $1 million, or one cent, a year ago. On May 4, Venator said it expected adjusted earnings to range between 10 and 14 cents per share, due to better-than-expected spring sales.
Sales gained 2.7 percent to $1.1 billion from $1.08 billion. Sales at its athletic stores rose 13.6 percent to $952 million with same-store sales ahead 14.1 percent, while Northern Group sales nudged up 3.3 percent to $63 million and grew 6.2 percent on a same-store basis.
“Sales from all Athletic and Northern Group retail formats exceeded our plan,” said Dale W. Hilpert, Venator’s chairman and chief executive. “Our more-focused company continue to provide trend-right products to our mall-based customers. Additionally, sales of Footlocker.com, our direct-to-customer business, increased 16.7 percent to $57 million, which included $8 million of Internet-only sales.”
“There’s a renewed fashion trend toward sneakers,” said Susan Silverstein, at Banc of America Securities. “Athletic footwear performed extremely well and apparel performed better, driven by some branded athletic as well as the private-label business.”
The owner of Fashion Bug, based in Bensalem, Pa., saw earnings rise 49 percent, to $8.9 million, or 9 cents, from $6 million, or 5 cents, a year ago. The year-ago period included a $1.2 million gain on the early retirement of debt. Excluding this gain, profits jumped 87 percent.
Sales jumped 47.2 percent to $381.3 million, including $104.4 million from the recent acquisitions of Catherine Stores Modern Women. Same-store sales at Fashion Bug rose 2 percent.
“We had a strong customer response to our spring product offering, which contributed to continued improvement in the gross margin,” said Dorrit J. Bern, chairman and ceo. “We have also begun to realize cost synergies related to our acquisition of Catherines Stores. As a result of earnings exceeding plan for the quarter, we are increasing our projections for earnings growth for the year from 25 percent to 30 percent.”
The Dress Barn
The specialty chain, based in Suffern, N.Y., saw earnings ramp up 29.8 percent in its third quarter ended April 29, to $8.4 million, or 44 cents a share, four cents ahead of Wall Street’s target. Sales climbed 12.9 percent to $163 million, with same-store sales ahead 6 percent. “This marks what we believe is a turnaround in regaining sales momentum after several mediocre quarters,” said Elliot S. Jaffe, chairman and ceo.
“We think we hit the fashion right,” said David Jaffe, executive vice president. “Dresses were very strong, and some career looks are coming around.”
The Philadelphia-based operator of the Urban Outfitter and Anthropologie chains saw earnings inch up 1.4 percent to $3 million, or 17 cents a share. Excluding a $1 million pretax charge last year tied to its investment in MXG Media, profits were down about 18 percent, stung by markdowns at the Urban chain, higher catalog costs, and startup costs for its May e-commerce launch.
Sales advanced 12.6 percent to $65.3 million. Same-store sales at its retail division, which accounted for 83 percent of sales, fell 4 percent.
Kelly Armstrong, at Wheat First Union, said the overall “high-fashion cycle” calling for cleaner, more dressy looks, and “bubblegum fashion” are working against Urban Outfitters’ more hip and grassroots fashion approach. “Urban is a little too edgy right now,” Armstrong said. Anthropologie is doing well, she said.
Earnings for the Philadelphia-based juniors chain rose 18 percent to $2.6 million, or 19 cents a share. Sales advanced 9.2 percent to $65 million with same-store sales ahead 3.8 percent.
Chief financial officer Lewis Lyons said cold and rainy weather in the East and Midwest shaped a below-plan 1.4 percent same-store decline in April, but earnings met plan. Standouts included bottoms, knee-length skirts and color. Marvin Rounick, president and ceo, cited “our ability to maintain solid gross margins, manage inventories and hold the line on costs.”