DSN index bucks Dow trend: helped out by good spring sales, retail stocks bloom

Discount Store News, May 5, 1997 by Neil Nordby

NATIONWIDE DSN REPORT -- The first quarter of 1997 was a lesson in contrasts for Wall Street. January and February, for example, witnessed the Dow Jones Industrial Average's daily assault on the record books, while the month of March was marred by a huge cascade in that benchmark's valuation. When all was said and one, however, the Dow Industrials stood at 6583.48, up a respectable 135.21 points, or 2.10%. In similar fashion, the S&P 500 rallied 2.21% before pausing for rest and relaxation at 757.12.

When the books were closed on the three-month trading period and the buy orders were swept from the floor, the Discount Store News Stock Index catapulted 286.79 points, or a solid 14.04%, before topping out at 2329.91. Warm weather spurred sales of spring merchandise and boosted retail sales during the month of February, many of the nation's chains reported. Salomon Bros. said its index of same store sales rose 4.7% in February, compared to a 5.2% rise a year ago and a 7.3% rise in January.

Among discounters leading the index into higher territory last quarter were Today's Man, up 138.46%; Ames Department Stores, up 111.59%; Pamida, up 80%; and Rag Shops, up 68.57%.

Today's Man stock rose 138.46% over the past three months from 1 5/8 on Dec. 31, 1996. to 3 7/8 on March 31. Over the past year, the 25-unit chain has taken steps to improve its financial underpinnings with a refined merchandising strategy. It also recently commissioned Salomon Brothers for investment banking advice as it progresses with its reorganization.

Ames Department Stores' shares moved sharply higher last quarter, gaining a whopping 111.59%, or $4.81 per share, to close at $9.13. The company announced net income of $17.3 million, or 76 cents per fully diluted share, for the fiscal year ended Jan. 25, compared with a net loss of $1.6 million, or 8 cents per fully diluted share, for the previous fiscal year.

Ame's income before other charges and gains for fiscal 1996 was $33.3 million, compared with $6.9 million in the previous fiscal year, a $26.4 million improvement. Net sales for last year were $2.16 billion, compared with $2.10 billion in the previous fiscal year, an increase of 2.7%.

Pamida reported substantially improved earnings in its fiscal fourth quarter ended Feb. 2, resulting in the $1.50 jump in the company's stock price. During the fourth quarter of fiscal 1997, the realized gross profit margin as a percent of sales improved by 90 basis points to 25.3% from 24.4% for last year's fourth quarter.

Shares of Rag Shops shot $1.50 per share higher for the quarter ended March 31 as a result of strong first quarter results. Sales for stores opened at least one year increased 13.6% for the quarter and 3.4% for the six months ended March 1, 1997.

The chain's management said that the marketing plan launched in September 1996 contributed significantly to the positive comparable store sales results. The company also reported an increase in earnings per share of 5 cents, compared to a loss per share of 7 cents for the same period in 1996.

Another solid performer, Stein Mart, continued to expand operations in the first quarter of 1997, opening 10 new locations. The company's stock price increased $8.25 per share to close the period at a price of $28.50. Previously, the company had opened between one and four stores in the first quarter of the year. The new stores bring Stein Mart's total store count to 133 in 23 states. The company has plans for further expansion; a total of 26 to 28 new stores are planned for 1997, which will bring the Stein Mart store count at yearend to approximately 150 stores.

In the CE category, Best Buy reported fiscal 1997 sales of $7.77 billion, up 8% from the $7.21 billion in sales it reported during fiscal 1996, For the quarter, Best Buy's share price contracted a modest 3.5% before closing at $10.25.

In contract to the industry's lead, same store sales for Circuit City slipped 4.0% in February. The company's stock was unaffected, however, as it rose 10.8% to $33.38 during the first quarter.

Leader Board

     DSN Stock Index

       1st Q '97

Today's Man    up 138.46%
Ames           up 111.5
Pamida          up 80.00
Rag Shops       up 68.57
DSN CHARTS: March sales

                            Total Sales                Comp-Store
Chain             (in millions)   % Chg. from '96   % Chg. from '96

Wal-Mart(1)       $10,287             13.5%                7.2.%
Kmart(2)            2,921             11.1                12.7
Sears(3)            2,540              7.3                 1.0
Costco              1,960             13.0                11.0
Sam's Club          1,836              3.0                 2.6
Target              1,618             12.1                 3.5
JCPenney(4)         1,292             (2.6)               (3.7)
TJX Cos.              635              5.0                 5.0
Circuit City(5)       591             15.0                (1.0)
Tandy(6)              377             (1.0)               (7.0)
BJ's Wholesale
  Club                260              3.7                (2.4)
Kohl's                244             29.2                11.5
dollar General        205             17.3                 4.5
Consolidated
  Stores              196            101.2                18.0
Ross Stores           186             18.0                10.0
Ames                  176              5.1                 6.8
ShopKo(7)             172              4.0                 3.5
Family Dollar         162             22.9                16.7
Hills Stores          147             (8.0)               (4.2)
Venture Stores        126            (11.7)              (12.1)
Michaels Stores       103              9.0                 8.0
Value City             97             11.7                (3.0)
Goody's Family
  Clothing             88             35.1                22.8
Mac Frugal's           76             19.7                18.0
Dress Barn             56             19.0                17.0
Men's Wearhouse        50             22.1                (1.8)
Rose's Stores          47             (2.7)               (1.9)
Filene's
  Basement             45             (8.0)               (9.0)
Fred's                 45             13.9                11.9
Roberds                27              8.5               (15.8)
Family Bargain         27             21.8                 4.8
Strouds                21              7.3                 4.7
Jan Bell
  Marketing            15             (2.2)               (3.9)
S&K Famous
  Brands               14             18.0                17.0