Merry-Go-Round still riding high Despite slump, sales soar at Joppa-based chain

October 16, 1990|By Cindy Harper-Evans

Merry-Go-Round Enterprises Inc. undoubtedly is making many other apparel retailers envious.

In the same sluggish economy that has others posting increasing drops in sales and earnings, the Joppa-based teen clothing chain is growing by leaps and bounds.

Merry-Go-Round announced last week that sales for the five-week period ended Oct. 6 increased 24 percent compared with the same period last year and that sales at stores open for a year or more -- called same-store sales -- increased 16 percent, the best in the industry. Other clothing companies are doing well to post single-digit gains in same-store sales.

And, while many apparel retailers have put growth plans on hold, Merry-Go-Round, which has 639 stores in 37 states under the Merry-Go-Round, DeeJaiz, Attivo and Cignal banners, has maintained its aggressive plan to open 75 more and remodel 60 others by the end of this year. What's the catch?

Analysts say it's a store-grown management team that knows its customers and the market and a sophisticated distribution center that enables the chain to cut off less popular items before they reach the stores and to ship larger quantities of merchandise in high demand quickly.

Merry-Go-Round officials have said the same. "Some of these things are going to sound simple, trite and mundane, but it works," said Donald L. Wampach, director of research for Chicago-based Hamilton Investments Inc.

What also works, analysts have said, is the that the retailer's customers seem to be insensitive to economic trends. The 15-to-25-year-olds Merry-Go-Round targets with its hip, high-style, trendy clothes apparently don't worry much about the savings and loan crisis or havoc in the Middle East.

"Their customers are not concerned about Junior going off to college because they are Junior," said Prescott, Ball & Turben retailing analyst Elizabeth Armstrong. The disposable income level is high among this group, and entertainment and clothing tend to be at the top of their list, she said.

Merry-Go-Round has established itself as a leader in catering to the capricious and lucrative -- albeit small -- 15-to-25-year-old niche, while other retailers have followed the clothing needs of the larger baby-boomer group and their children.

Marketers say one of the few things that will stop Merry-Go-Round's clientele -- mostly young people -- from buying is a high unemployment rate. But, for the most part, even if they are laid off, the customers aren't likely to be out of the buying market for long.

"When you're getting paid minimum wage or a little above minimum wage, it's easier to find another job if you get fired," Ms. Armstrong said.

Despite the success of the Merry-Go-Round chain, industry observers predict that if a recession hits hard and stays long, the retailer will start showing signs of being human.

The bear market for retailers in general already has hurt the chain's stock price. Merry-Go-Round's stock closed up 62.5 cents at $15 in over-the-counter trading yesterday, more than $12 below its early-June price.

"I think it will begin to feel the same pressures everyone else is feeling now," said Seidler Amdec analyst Thomas H. Tashjian.

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