Restaurant, clothing chains tell plans Merry-Go-Round, IHOP appear at stock seminar.

November 12, 1991|By Ross Hetrick | Ross Hetrick,Evening Sun Staff Kevin Thomas contributed to this story.

Merry-Go-Round Enterprises Inc., the Joppa-based clothing chain, has ridden to success on the fashion consciousness of young men and women. Now that fashions are in the doldrums, Merry-Go-Round is cutting prices to keep its customers.

Merry-Go-Round was one of the companies featured at the Consumer Growth Stock Seminar held yesterday by Alex. Brown & Sons Inc., a Baltimore investment banking firm. Another was the International House of Pancakes, which expects to undergo a five-year expansion that will add 165 restaurants to the national chain.

"It's more the fashion cycle rather than the economy," said Merry-Go-Round president and chief executive officer Michael D. Sullivan, explaining a leveling-off of earnings in the last few months. "We plan to be very aggressive . . . during the first six months of next year."

Merry-Go-Round, which was founded 21 years ago, also includes the Menz, Dejaiz, Attivo, Cignal, Silvermans, His Place and Boogies Diner chains. The company had 675 stores at the end of its 1991 fiscal year Feb. 2. Since 1987, earnings have increased by more than five-fold, hitting $37.5 million at the end of fiscal 1991.

With the fashion side of the clothing business having fallen off recently, stock analysts are revising downward their earning estimates for Merry-Go-Round's third fiscal quarter, to a modest increase.

Sullivan acknowledged that consumers are more "price-conscious" and the company is offering promotions to maintain its market share, which he said is essential. "It's hell to get them back if they get in the habit of walking by you," he told analysts.

Once the fashion cycle does change, "it will go to very avant-garde fashion," Sullivan said.

Despite any current problems, Merry-Go-Round is very bullish on the future and last year broke ground on a 450,000-square-foot addition to its Harford County distribution center. The expansion will double the size of the complex and allow it to serve up to 1,500 stores, Sullivan said. Completion is scheduled for 1992.

The expansion planned by the International House of Pancakes will boost the chain to 620 restaurants, according to Richard K. Herzer, chairman and chief executive of IHOP Corp.

Currently, the Glendale, Calif.-based chain has five restaurants in the Baltimore area and 10 in the Washington area. Officials at IHOP said yesterday that some of the expansion will occur in the Baltimore and Washington metropolitan areas but the locations have not been chosen.

Besides the openings, IHOP plans to close 45 restaurants during the same period.

Last July, IHOP went public, raising approximately $29 million so far. About $25 million will go to pay the company's debt, which was incurred when IHOP was purchased in a management-led buyout in 1987, said Fred Silny, a company spokesman.

The other $4 million will go toward the expansion plans, Silny said.

"We also will be remodeling our existing restaurants," Herzer said. "Seventy-one restaurants were remodeled this year and sales in these units increased following this renovation. Our plans are to continue this remodeling program, with our objective being that each restaurant will be remodeled every five years."

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