Michelle Shakeshaft worked at the Limited Express on the second floor of the Hunt Valley Mall a few years ago, but she always came downstairs to Merry-Go-Round to shop.
At a recent road show stop in Chicago, when Merry-Go-Round
was shopping its shares at its latest offering, an analyst sitting next to Isaac Kaufman, the chain's chief financial officer, had to ask him the target market of Merry-Go-Round's clothes.
"That's something an analyst should just know. Many financial institutions just don't know the Merry-Go-Round story. People have been ignoring them because they are not as large as The Gap and The Limited," two other highly successful specialty retailers, Mr. Wampach said.
But that may be changing. The Wall Street Journal mentioned the company's March sales figures a few weeks ago and even ran a short story about them. "That's the first time I've ever seen that," Mr. Wampach said.
What has really begun to catch analysts' attention is the job Merry-Go-Round did when it bought 124 Silverman's, an ailing men's chain with locations around the country, and transformed it into a profit machine.
When Merry-Go-Round bought the Silverman's stores, the units had unimpressive sales of $155 per square foot. Less than a year later, the sales pace had quickened to just under the Merry-Go-Round average of $325 per square foot, well above the industry average. Now, Silverman's stores are averaging $375 per square foot.
Sales were increased, Mr. Sullivan says, by pushing the company's well-known IOU brand at Silverman's stores, which cater to young men, and by starting a gradual remodeling program focused on attracting new customers.
Mr. Sullivan calls the new design "more masculine-looking with colors and lots of tile."
With all its fashion know-how and trendsetting, Merry-Go-Round management is more like a Brooks Brothers suit when it comes to finances. "On the financial side they are very conservative," said Thomas H. Tashjian, a Seidler Amdec analyst in Los Angeles.
The chain's long-term debt is $31 million. That includes the original note on the new headquarters in Joppa and the mortgage on the Boogies Diner building in Georgetown, the newest company concept featuring a diner inside a two-level clothing boutique.
Merry-Go-Round pays for virtually everything by cash, which igets through stock offerings. Mr. Sullivan anticipates a $55 million cash flow in fiscal 1992. The chain's stores aren't very expensive to build and become profitable quickly.
Three years ago, Mr. Sullivan was approached by now-defunct Drexel Burnham Lambert to conduct a leverage buyout of the company, but turned the brokerage house down. "They said I could have bought the company for $150 million and sold it for $1 billion down the road. It wasn't a sure thing, though, and I didn't think it was worth finding out," Mr. Sullivan said.
Once Merry-Go-Round reaches its goal of 1,500 stores in the U.S., it's not likely growth will halt for very long. Mr. Sullivan once said in an interview that his biggest business "tragedy" would be to see the Merry-Go-Round name disappear.
"If free trade becomes a reality and the economic situation picks up, we will set up stores in Mexico. They have 75 million people and very few retail stores," Mr. Sullivan said, adding that the Merry-Go-Round concept is already immensely popular in cities such as El Paso, Texas, and Miami. "We are also looking to start the Boogies Diner concept in the Far East."