Retailer Is Feeling Younger, Energized

Stung by slumping profit and what it called fashion missteps just a few years ago, the girls’ apparel retailer formerly known as Too Inc. has rejuvenated its bottom line by putting its focus back where it began.

Tween Brands Inc., which changed its name last month, attributes the turnaround to reemphasizing its core customer -- girls 7 to 14 -- especially through its 2-year-old discount chain, Justice. The brand’s success has been a key factor in driving the company’s sales growth and stock price, which hit record levels this spring.

The company, based in suburban New Albany, Ohio, abandoned an earlier line of stores that catered to teenagers in favor of launching Justice, a chain that targets the same age group as its flagship Limited Too stores but with lower prices.

Tween Brands has announced plans to open hundreds of Justice stores over the next five years.

“Justice is a winner, and it seems that while Justice wins, Limited Too can win as well,” said Michael Rayden, Tween Brands’ chairman, president and chief executive.

Rayden said the company was considering launching a third retail concept at the end of 2008.

Both existing chains target tweens with colorful T-shirts and tank tops, trendy faded jeans and accessories such as shoes and purses. Limited Too is primarily mall-based, and most Justice stores are in strip shopping centers.

The company decided in 2003 to close its teenage chain, called mishmash, because of heavy competition. At the same time, fashion choices at Limited Too failed with customers and hurt sales.

“We became distracted as a brand,” spokesman Robert Atkinson said. The retailer, focused on driving customers to the mishmash brand as they matured, tried to “age up” the look at Limited Too with an eye toward girls on the older end of its range. But that missed the brand’s average customer, who is about 10, Atkinson said.

So it was out with mishmash, in with Justice, the chain that launched in January 2004 and is named for Rayden’s now 14-year-old daughter.

Justice has 115 stores across the country. The company plans to open 65 to 70 more this year and about 100 stores annually for the next five years, Rayden said. The company hopes to eventually have 800 to 900 Justice stores across the United States and Canada.

Tween Brands reported Wednesday that it earned $6 million, or 18 cents a share, in its fiscal second quarter ended July 29, up from $4 million, or 12 cents a share, a year earlier. The results matched expectations of analysts surveyed by Thomson Financial.

Revenue rose to $185.8 million from $154.9 million.

Same-store sales, or sales at stores open at least a year -- considered a key indicator of a retailer’s strength -- were up 10% for the entire company. They rose 30% at Justice stores and 9% at Limited Too.

The company reaffirmed its earnings outlook for the year of $2 to $2.10 a share. Analysts had expected $2.08 a share. But Tween Brands shares fell $2.02 to $36 as it appeared that investors were expecting a more upbeat outlook.

What has helped drive Justice’s performance is the location of the stores, said Chris Boring, president of Boulevard Strategies, a Columbus-based retail consulting firm.

“The American shopper is shopping a lot more outside the malls than they were in the past,” he said.

Justice reached out to customers at home this summer by mailing about 1 million copies of a new “catazine” -- part magazine, part catalog -- that’s similar to those Limited Too has sent out since 1999.

The chain also started hosting in-store birthday parties in April, offering themes such as “rock idol” and “movie star.” By June, the chain was averaging 157 parties involving about 1,100 girls each week at the 112 stores then open, Atkinson said.