Clothestime’s Lean 2nd Quarter Is Better Than the First
Clothestime on Monday reported a slim profit of $31,000 for its second quarter ended July 30, as the Anaheim-based junior clothes retailer continued to be hit hard by an industrywide downturn.
The profit, which came on sales of $43.4 million, was sharply lower than the same quarter a year ago, when the company earned $5.2 million on sales of $49.4 million. But Clothestime’s second-quarter performance was stronger than many analysts anticipated and marked a sharp improvement from a first-quarter loss of $819,000.
John Shanklin, a company spokesman, said business should improve in the third quarter, a traditionally strong period because of back-to-school buying.
Business so far this year, however, has been hurt by the lack of any new fashion trend. “We are still seeing the mini, midi and the maxi. Skirts haven’t found a length yet,” said Shanklin.
Clothestime specializes in discounted brand-name apparel for women between the ages of 12 and 24. The company has 341 stores throughout the country.
Analysts said the company is in sound condition and well positioned to weather the sharp nationwide downturn in retail clothing sales this summer.
“This is a well-managed company with no debt. It’s in a lot better position than many highly leveraged retail chains. Clothestime could tough out losses like these for a long time,” said Sarah Stack, a securities analyst at Bateman Eichler, Hill Richards.
Clothestime, which relies on deep discounts, has faced stiff competition this summer as full-price retailers have been slashing prices to spark sales, Stack said.
Profits have been further squeezed by higher costs for material and labor, according to Stack. While the consumer price index has been rising at an annual rate of 4%, the clothing component of the index has been rising at a 10% rate.
According to Frank Podbelsek, a securities analyst with Paine Webber in Los Angeles, Clothestime will probably be one of the last retail chains to benefit from an eventual turnaround in the market because most of the chain’s stores are in strip malls, rather than larger shopping malls with more pedestrian traffic.
“You need to have substantially cheaper prices to induce people to drive to your store, while you lose out on pedestrian customers,” Podbelsek said.
CLOTHESTIME RESULTS
Year ends in January
Revenue Net Income (thousands) (thousands) 1986 First quarter $31,237 $1,801 Second quarter 41,379 4,460 Third quarter 45,539 3,964 Fourth quarter 42,179 1,683 1987 First quarter 40,884 2,556 Second quarter 49,401 5,215 Third quarter 46,752 -1,565 Fourth quarter 41,658 303 1988 First quarter 37,798 -819 Second quarter 43,362 31
