Merry-Go-Round plans slower growth this year

June 18, 1993|By Michael Dresser | Michael Dresser,Staff Writer

Merry-Go-Round Enterprises will slow its growth and curb its appetite for acquisitions for at least the rest of the year, President Michael D. Sullivan told shareholders at the company's annual meeting yesterday.

The Joppa-based retail clothing chain capped several years of accelerated expansion with the announcement in March that it would purchase the 450-store Chess King chain from Melville Corp. For now, though, the company will concentrate on improving its faltering sales at existing stores, Mr. Sullivan said.

Even if an attractive acquisition deal came along, Merry-Go-Round would pass on it, he said.

"We've got a serious digestion problem," Mr. Sullivan said after the meeting, adding that internal expansion would slow, with the addition of 56 stores in fiscal 1994, down from 76 stores last year.

With the Chess King acquisition, Merry-Go-Round operates 1,429 stores under various names, up from 989 at the end of fiscal 1993, which ended Jan. 30. The company earned $38 million on sales of $877.5 million last year.

Mr. Sullivan told shareholders that Merry-Go-Round will introduce private label in time for the back-to-school season this year. The company's current private label, I.O.U., has been selling briskly but at low margins compared with brand merchandise. The new label's prices will be positioned between those of I.O.U. and more expensive brands, he said.

The executive said Merry-Go-Round's sales of total items have been up but that comparable-store dollar sales have been down because the chain's cash-strapped teen-age customers have been switching to the less-expensive I.O.U. line.

Several shareholders questioned Mr. Sullivan about the company's recent woes, noting that the stock had fallen dramatically from $17 earlier this year. Shares closed yesterday at $11.375, down 12.5 cents.

Mr. Sullivan said the drop was mostly the result of disappointing first-quarter earnings, which were 72 percent lower than in the same period the year before.

Nevertheless, Mr. Sullivan expressed optimism for the long term.

Noting that, with the Chess King acquisition, Merry-Go-Round will break the $1 billion sales mark this fiscal year, Mr. Sullivan set a new corporate goal for the 1990s.

"It will now be possible for Merry-Go-Round to achieve $2 billion in sales before the year 2000," he said.

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