Gadzooks to Keep Distinct Identity From Forever 21 After Acquisition

Godzooks Inc. will maintain a separate identity from Forever 21 Inc. in the wake of Forever 21’s acquisition of the Texas retail chain, according to Larry Meyer, vice president and chief financial officer of Forever 21.

When Forever 21 announced the $33 million purchase on Thursday, manufacturers, retail analysts and mall operators wondered if the vibrant, Los Angeles retailer would simply merge Gadzooks’ assets into its own, but Meyer said the two companies’ demographics are too different to create one giant retailer.

Carrollton, Texas–based Gadzooks has been making attempts to improve sales in recent years, including dropping its young men’s offerings. The company filed for Chapter 11 bankruptcy protection in early 2004.

Gadzooks will operate as a separate juniors division of Forever 21. Meyer said that Forever 21 will continue retailing contemporary clothes for women ages 15 to 50. “Once we get the four-wall business going, we’ll look into potential expansion of Gadzooks.”

Forever 21 anticipated keeping at least 150 of Gadzooks’ 243 stores open. Meyer did not say whether any of the Texas retailer’s managers or executives will be retained. Forever 21 will build 35 new stores each year for the next five years.

Don Chang, chief executive officer and founder of Forever 21, said in a company statement that he believed that joining the two companies will make a stronger brand.

The move was warmly received by manufacturers such as Gloria Brandes. Her company, Newport Beach, Calif.–based BB Dakota, sells its juniors and young men’s apparel both to Gadzooks and Forever 21.

“Our Gadzooks business was shrinking because the number of stores was shrinking. I saw no future with them,” Brandes said. “I’m relieved that an organization as vibrant as Forever 21 is taking over. It’s going to mean more business.”

The purchase should bring more sizzle to Gadzooks’ retail mix said Mary Wilberding, president of contemporary Los Angeles manufacturer One World Apparel, who formerly worked with Gadzooks when she was president of Union Bay Juniors from 1995 to 2001. “Gadzooks’ ability to really talk to their consumer has had a hiccup, and Forever 21’s vision and knowledge of that consumer is strong,” Wilberding said. “It could be a wonderful marriage.”

Forever 21 has more than 200 stores. The company achieved 2004 sales of $640 million, up from an estimated $503 million in 2003.

The acquisition is subject to bankruptcy court approval. —Andrew Asch