Limited Too dumped for Justice
By Staff -- Gifts and Dec, 8/14/2008 8:03:00 AM
NEW ALBANY, Ohio—Tween Brands this week announced it would convert all 560 of its Limited Too stores across the country to its more value-oriented Justice brand in a move the company says will “drive growth and profitability” in a period of tough economic times.
Upon completion of the conversion by the end of the first quarter of 2009, the Justice chain, which currently has 310 stores and according to Tween Brands has averaged double-digit comparable store sales over the last 14 quarters, will have more than 900 stores nationwide. After the move, Limited Too will live on only as a product brand at select Justice stores. Both chains sell apparel and lifestyle products to 7- to 14-year-old girls.
By refocusing on one store brand, Tween Brands expects to achieve annual after-tax savings of $20 million to $25 million, or $0.80 to $1.00 per share, in part from reduced back-office headcount and from lower marketing and store operation expenses.
As part of the move, Tween Brands plans to close 26 underperforming Limted Too stores by the end of fiscal 2008 and will monitor another 90 former Limited Too locations for possible off-mall relocation under the Justice banner.
"This is a bold strategy to capitalize on the tremendous success of Justice and the changing trends in our economy and our customers' preferences," said Tween Brands chairman and CEO Mike Rayden. "Especially in these tough economic times, our customers are seeking the more value-oriented apparel available at Justice, which is priced on average approximately 20 percent to 25 percent lower than Limited Too."
In a limited number of prior conversions of Limited Too locations, the new Justice stores that replaced them “have done equal or more volume, and in a few cases, significantly more,” according to the company.
"Limited Too was the brand that introduced great fashion to tween girls, but our customers are looking for the next great thing and their parents want more value for their dollar,” Rayden added. “We believe Justice fits that bill as evidenced by strong sales comps at Justice and weaker comps at Limited Too, including this quarter's results. In fact, from fiscal year 2005 to fiscal year 2007, overall net sales at Tween Brands have increased 34 percent, yet our operating income has increased only 2 percent due in large part to the significant investments we have made to differentiate Justice and Limited Too.”
For the second quarter, ending August 2, 2008, Tween Brands reported a net loss of $6.7 million, compared to net income of $2.1 million reported for the second quarter 2007.
Net sales for the second quarter of 2008 were $223.1 million, a 4 percent increase from the 2007 quarter. Justice sales were $69.3 million. Limited Too’s sales were $145 million. Sales increases were driven by new store sales growth, up 12 percent, offset by a decrease in comparable store sales of 8 percent, with Limited Too's comp store sales down 11 percent and Justice's comp store sales up 3 percent. The company's e-commerce sales increased 22 percent during the quarter.
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