Charming Shoppes Aims For Market Vacuum Left By Size Shortage
July 17 2009 - 1:12PM
Dow Jones News
As retailers' selection of clothing size narrows, plus-size
retailer Charming Shoppes Inc. (CHRS) is stepping in to try to pick
up the slack, or slacks.
In a consumer spending crunch, retailers like Old Navy, owned by
Gap Inc. (GPS), and AnnTaylor Stores Corp. (ANN) are offering their
plus-size apparel only online. An Ann Taylor representative said
the move was because of low demand in their stores. And industry
experts say it involves extra work and a different process for
private-label retailers to produce plus-size clothing, because the
clothing should be fitted differently, instead of just sized
up.
But specialty retailer Charming Shoppes is revamping its core
plus-size brands, with the help of new management led by recently
hired Chief Executive and President James Fogarty, known as a
turnaround specialist after serving as managing director of
restructuring firm Alvarez & Marshal. Charming Shoppes' main
brands are Lane Bryant and Catherines, along with Fashion Bug,
which has both plus and misses sizes. The company has moved to make
Lane Bryant more fashion-conscious, which brand President Brian
Woolf first saw as a risk.
"We were almost afraid of the fashion side of the business," he
said. "Now we're driving the business with fashion and trends."
Investors have reacted well to change in the company's
management and approach. In just the last five months, shares have
risen more than eight times in value since hitting a year low of 45
cents in early March, and are now changing hands at $4.34. Over the
same period, the S&P 500 has risen 31.9%
The company also plans to produce more of the clothing it sells,
which Woolf said he expects to happen around 2010.
About two-thirds of the U.S. is either overweight or obese, a
significant demographic for retailers to direct away from their
stores or even ignore. While growth in the numbers has leveled out
over recent years, the average U.S. woman remains around 5'4" and
164 pounds, according to the Centers for Disease Control and
Prevention.
Kat Fay, an analyst with market research firm Mintel, said the
plus-size market is "grossly under-served."
"Women are not very happy with the selection," she said. "They
find it very difficult to shop."
Consumer dissatisfaction, which has been a constant in the
plus-size market, could leave room for retailers like Charming
Shoppes to grab more of a fragmented market. It is spearheading the
effort with changes at Lane Bryant and Fashion Bug. At Fashion Bug,
the store has limited its size selection from 6 to 30. And some
experts say Lane Bryant's focus on fashion has started to pay
off.
The brand's merchandise margin has improved despite a 13% drop
in same-store sales in the first quarter, meaning that for the
customers who do shop at the store, the company doesn't have to
mark down its merchandise very far.
It is "the first glimpse this strategy is working," said
Christopher Kim, an analyst with J.P. Morgan. But he rates the
stock at neutral because the company's short-term results might be
weak.
The company also said in its first-quarter conference call that
it had inventory problems at Lane Bryant because of increased
demand for more trendy items. Woolf said that a new advertising
strategy had been more effective than expected, and the company has
adapted.
"We've made our adjustments in terms of the product assortment
going forward," he said.
But plus-size clothing has taken the biggest hit in consumer
spending over the past year, falling 9.6%, according to a report by
NPD Group Inc., compared with a 5.1% drop in all women's clothing.
Kim says sales might have fallen not because the women don't want
to shop, but because the women have fewer options because of cuts
in size selection from retailers and department stores.
Charming Shoppes hopes to attract the shoppers that shy away
from Lane Bryant's trendy fashion to its conservative brand, called
Catherines. And for bargain hunters, the company is emphasizing low
prices at Fashion Bug.
-By Alexandra Scaggs, Dow Jones Newswires; 212-416-2673;
Alexandra.Scaggs@dowjones.com