New Focus for Clothestime Could Include New Owner
Clothestime is in the works to restructure the company and its merchandising mix—again.
The Anaheim, Calif.-based retailer is retooling its image along with its merchandise as it courts a new owner.
The company is currently in negotiations with an international manufacturer, according to sources close to the company, although the deal has not yet been finalized. If it is signed, Clothestime officials say it would be a positive step for the beleaguered chain, providing an infusion of capital for “breathing room” and a stronger merchandising strategy.
A new owner would cap off the 250-store chain’s makeover efforts begun last fall, when it began converting about 100 of its units to outlet stores and shuttered about 20 sites, including a location in Santa Monica, Calif. Clothestime, known for its selection of private label and branded merchandise, including Mudd, Paris Blues, and LEI, wants to position itself as a discount alternative to more pricey retailers such as Abercrombie & Fitch and American Eagle Outfitters.
The new merchandising mix will target a wider audience, with rock-bottom prices of $5 to $20 and directional fashions aimed at juniors shoppers and more career apparel for an older demographic. It hasn’t been determined what brands will be carried under the new structure.
If the acquisition goes through, Clothestime executives said they plan to keep the company name, add about 100 stores to its mix and keep its base of 1,800 employees intact. Initial reaction to the deal by retail watchers is cautious until more details become available.
“The brand has visibility, and a new player can come in and re-energize its focus,” said Liz Pierce, retail analyst at Wedbush Morgan Securities.
Second time around
It’s not the first time the 28-year-old company has run into fiscal woes.
The one-time public company emerged from bankruptcy in 1997 with about $200 million in sales after it fell on hard times during the 1990s as competitors grabbed market share with name brands.
Clothestime’s latest push to jump start sales was an $8 million marketing campaign begun last May featuring a radio blitz and magazine ads in YM, Cosmopolitan, CosmoGirl and Marie Claire. But, like other retailers, Clothestime didn’t eke out a successful backto- school season and had bills to pay. Some vendors, including Bongo jeans, stopped shipping product in October. Bongo even took on the role of financier for the retailer.
“We couldn’t get them past our factor, CIT, so we had been carrying them for credit for six to seven months, which worked out well until October when they couldn’t complete the transaction,” said Gary Bader, president of New York-based Bongo, who added that there are no hard feelings between the companies. “I’ve had a good relationship with them, and if things work out for them, I’d be happy to ship them goods again.”
The change in strategy for Clothestime isn’t surprising, say industry veterans, given the troubled teen sector. In recent months, youth-oriented retailers including Californiabased companies Wet Seal Inc. and Charlotte Russe Holding Inc. have reported downturns in same-store sales compared to the year prior. And, last October, Tommy Hilfiger announced it was closing 37 of its 44 specialty stores by the end of January 2003.
The glum news is a sharp twist from the heady times when the teen market was growing at double-digit rates in past years, even amid the economic slump and aftermath of terrorist attacks in 2001, according to Marshal Cohen, co-president of NPD Fashion- World, a business unit of NPD Group.
The cycle screeched to a halt in 2002 when female apparel sales dropped 4.8 percent through October.
Chief among the reasons for the dismal performance is the vacuum of fashion direction.
“When trends aren’t clear, when there isn’t anything to gravitate to, it’s easy to put off purchasing,” Pierce said.
As a result, more companies are spurring consumers to open pocketbooks with promotional pricing, and the frugal penchant has spawned success for Southern California retailers Forever 21, Reference, Styles for Less and Clothes Minded Inc.
It’s an inevitable trend, say industry observers, as apparel competes with other categories for those rhapsodized teenage dollars.
“Apparel isn’t on the forefront of every teenager’s minds—there’s cell phones, PDAs, MP3 players—so they’re learning to buy on a budget,” Cohen said.
This all dovetails nicely into Clothestime’s fashion-on-a-shoestring strategy. But Cohen cautions against flooding the market with lower- priced retailers. If there are more me-too retailers joining the bargain-basement wagon, then consumption ennui can set in again.
“Too much of a good thing isn’t good— there’ll be too much of the same product and not enough buyers,” he said. “The real answer for retailers is to figure out what has made them successful—if they’re up channel or down channel—and stay focused on that strategy. Otherwise, they’ll have a hard time beating the Wal-Marts and Targets of the world.” —with contributions from Claudia Figueroa
