Clothestime May Padlock Lagging Stores : Apparel: Anaheim-based chain has laid off some employees in its ongoing financial struggles.

Clothestime Inc. has laid off some employees in recent weeks and is considering closing some unprofitable stores, the company said Wednesday, as it struggles to reverse financial woes that have plagued the retail chain for two years.

A Clothestime spokesman declined to discuss specifics of the ongoing cost-cutting plan. But he described the recent layoffs as “less than one half of one percent of our 5,000 employees.”

The cuts are being driven by a string of weak quarterly reports at the 550-unit chain that sells relatively inexpensive women’s apparel. On Nov. 16, Anaheim-based Clothestime reported that it lost $2.3 million, or 16 cents per share, for the third quarter ended Oct. 28, as revenue fell by 2% to $78.7 million.

“They’ll probably close some of their unprofitable stores,” said Howard Raab, president of Park Avenue Transglobal Financial Services Inc., a Los Angeles-based commercial credit service. “That’s their plan. What they haven’t said is how many.”

Raab also said that Clothestime’s financial problems are prompting some lenders to limit credit to companies that supply goods to the retail chain.

Meanwhile, rumors about the Anaheim-based chain’s financial health continue to swirl in the tightknit clothing industry.

“Target, Sears, Kmart and Wal-Mart are simply killing them,” said one retail industry executive who has tracked Clothestime’s progress since the mid-1980s. “There’s just too much low-priced apparel out there, and some of these big guys are simply undercutting Clothestime.”

Clothestime executives have acknowledged that the chain needs to reposition itself before profitability can be restored. The company carved out a profitable niche during the 1980s by selling private-label apparel at low prices.

But that strategy has soured in recent years. Clothestime has lost more than $18 million in the last two years, while its revenue base has shrunk as customers embraced large discount chains that offer popular brands at attractive prices.

Clothestime’s stock has mirrored the chain’s poor performance: While its shares hovered above $10 during the early 1990s, the price has been slumping. Clothestime was down 12.5 cents to $1.625 Wednesday in Nasdaq trading.

Clothestime hired former department store executive Lynne Sperling earlier in the year to design a merchandise mix that would highlight the chain’s private labels as well as sate consumers’ increasing appetite for high-quality brands.

But the turnaround has been difficult because “the major discounters, with their tremendous buying power, are simply under-cutting Clothestime,” said New York-based retail industry analyst Kurt Barnard.

“Clothestime started out with both guns blazing [during the 1980s] but then they hit a brick wall and they haven’t been able to recover,” Barnard said. “You have to wonder what’s keeping them up.”

Clothestime isn’t the only retailer that needs a strong holiday sales season to regain profitability.

Said Raab: “It’s possible that a half-dozen retailers, including our friends over at Kmart, will file [in Bankruptcy Court] after the holidays.”