Apparel off-pricers shake off shakeout woes - Discount Industry Annual Report

Discount Store News, July 4, 1988

Apparel Off-Pricers Shake Off Shakeout Woes

Nationwide DSN Report

Despite a major softening in the women's apparel business during the second half of last year, most off-price apparel chains recorded healthy sales gains during 1987.

While apparel specialty chains like The Limited and Charming Shops, among many others, limped along to fiscal year-end with flat to modest 1987 sales, the top 11 off-price chains, as shown in the accompanying chart, saw sales jump 17.2 percent to $5.9 billion.

The shakeout among off-pricers over the alst several years didn't claim any major casualties in 1987. And a couple of major off-pricers that struggled in '86 turned things around last year by refocusing their strategies on providing consumers with real value.

TJX Cos. Tops Marshalls as No. 1

Mainly due to the 22.7 percent sales growth experienced by T.J. Maxx during the fiscal year, TJX Cos.--which includes T.J. Maxx, Hit or Miss and the cataloger Chadwick's of Boston--is now the No. 1 apparel off-price company, topping Marshalls.

TJX, now a public company (Zayre Corp. retains a majority ownership), was also one of the most profitable off-pricers last year, posting a 27.7 percent increase in real net income, along with a 17.8 percent sales gain.

Unlike the family-apparel oriented T.J. Maxx, Hit or Miss, being a more high-fashion oriented women's wear off-pricer, was hurt by the women's apparel slowdown during the last half of the year. Hit or Miss improved its sales by a mere 2.9 percent (estimated) last year. Ben Cammarata, currently acting president of Hit or Miss (as well as being president and ceo of TJX Cos. and chairman of T.J. Maxx), said recently that he instituted changes at Hit or Miss to make it "less vulnerable to the whims of fashion. We want to move the chain to more value price points."

Marshalls a chain that turned things around '87. The chain doubled its sales growth last year (13.8 percent gain in 1987 compared to a 7 percent 1986 rise) to top $1.6 billion in sales, and profits also improved.

Marshalls, like many other off-pricers, must compete for department store and specialty store customers, offering the high-visibility brands that customers want. Marshalls had gotten away from that and wasn't rigorous in upscaling its store environment.

Now the huge off-pricer, which added key top management last year (see Marshalls chain profile, page 151), is back on track, having refocused its merchandise mix to higher-end brands and labels.

Ross also improved its store-for-store sales last year and its earnings stabilized after an $11.7 million loss before taxes in 1986. Since shifting to a more family-oriented apparel strategy and adding cosmetics and fragrances, petites, and large sizes for men and women, Ross staged a mini-comeback in 1987. Comparable store sales were up 7 percent--8 percent in the first quarter, 11 percent in the second, no increase in third quarter and a 9 percent increase in fourth quarter.

Growing at a rate in league with T.J. Maxx was Burlington Coat, which saw sales jump 25.6 percent last year. The off-pricer had a particularly strong fourth fiscal quarter and holiday selling period, considering the general apparel industry softness, and has been aggressively upscaling its store environment. Net income also improved by 16.9 percent to $20.3 million last year.

Loehmann's was an undistinguished 1987 performer, growing by just 3.4 percent after a 9 percent sales growth in 1986. Parent May Co. has been closemouthed about the chain. Store growth plans are modest.

Top management of Filene's Basement are attempting to take the Massachusetts institution private. Campeau Corp., as is the case with Gold Circle and MainStreet, announced early on that it wasn't interested in retaining the chain. The Basement had a respectable 1987, with a comparable store sales increase of 12.1 percent (it opened no new units last year and none are planned for this year).

From October 1986 through October of last year, Syms quietly added about 50 percent to its existing selling space. In addition to a 14.3 percent sales jump last fiscal year, Syms also registered a 20 percent jump in net income to $17.8 million from $14.8 million in 1986. It doubled the size of its Bergen County, N.J., unit, opened a new distribution center and greatly improved its internal systems to better track sales.

Kids "R" Us went through the roof last year, with estimated sales up 100 percent to $250 million. The off-price children's apparel division of Toys "R" Us will be opening 10 units this summer alone in a new market, Southern California, and sales are projected to hit $400 million by the end of this year.

Clothestime Posts 11.2% Sales Gain

Clothestime had a tough second half last year, due mainly to the women's apparel slowdown, but the California-based off-pricer managed a healthy 11.2 percent sales gain overall in 1987.

The Dress Barn fared better, recording a 28.1 percent sales increase last year. In fiscal 1988, estimates call for the women's apparel off-pricer to top $200 million for the first time. Net income grew to $12.9 million from $9.2 million in 1986.