Merry-go-round Gets Rescuer

September 03, 1993|By Michael Dresser | Michael Dresser,Staff Writer

Merry-Go-Round Enterprises reported earnings and sales yesterday, and the numbers were horrendous enough to bring founder Boogie Weinglass down from his Colorado mountaintop on a rescue mission.

The Joppa-based clothing store chain posted a loss of $2.5 million, or 5 cents a share, for its second quarter that ended July 31. That compares with earnings of $6.4 million, or 12 cents a share, for the second quarter last year.

Even more disturbing, Merry-Go-Round got off to a miserable start for the critical third quarter, as comparable-store sales for August plunged 16 percent. Total sales, a much less important indicator, increased 18 percent to $214.4 million, compared with $181.6 million in last year's second quarter.

The latest results, which continue a two-year slump in sales and earnings for Merry-Go-Round, were apparently enough to put a temporary end to the early retirement of Leonard M. "Boogie" Weinglass, the company's 51-year-old founder and chairman.

Carolyn McNabney, assistant to Merry-Go-Round chief executive Michael D. Sullivan, said yesterday that Mr. Weinglass would return to Baltimore for about six months to serve as a consultant to the company's merchandising division. Earlier, Merry-Go-Round executives informed analysts of the move in a conference call.

Mr. Weinglass, who is leading one of the groups attempting to bring a National Football League franchise to Baltimore, has left the day-to-day management of Merry-Go-Round to others since 1979. The colorful Baltimore native, the model for one of the characters in the movie "Diner," founded the company in 1968 as single store in Atlanta.

In recent years he has lived in Aspen, Colo.

Mr. Weinglass will be returning to a company that was one of the shining stars of the retail industry of the late 1980s, when sales grew astronomically thanks to an aggressive expansion campaign and a sharp eye for cutting-edge fashions that would appeal to its youthful customer base.

But now Merry-Go-Round has serious problems.

A deal this March that added 476 Chess King men's clothing stores to bring the Merry-Go-Round chain to 1,450 stores is now widely viewed as a costly mistake. Comparable-store sales have dropped for eight straight months; earnings have been erratic; and the stock price has plummeted 49 percent since the beginning of the year.

Merry-Go-Round's stock closed yesterday at $7.875, unchanged from Wednesday.

The second-quarter loss was slightly worse than the average of analysts' projections, but fell short of a dire warning by Alex. Brown & Sons analyst Robert F. Buchanan that the loss could reach 10 cents a share

In a statement yesterday, Mr. Sullivan said Merry-Go-Round has reviewed its operational structure and has begun to cut costs at its corporate headquarters.

He added that in late fall the company plans to introduce a new advertising campaign.

"We believe this action, in tandem with strategic changes in our merchandising and marketing plans, will result in significant cost savings and improved profitability over the second half of this fiscal year," he said.

Mr. Sullivan's job as president and CEO is not in immediate peril, analysts agreed. He is widely viewed as one of the brightest chief executives in retailing, and his management team is highly respected.

"Here's a team of people who built a very successful big business," said Howard Davidowitz, chairman of Davidowitz and Associates, a national retail consulting firm in New York. "I think this is the team that ought to fix it."

To fix the company, the management will first have to answer the question of what went wrong.

In its public pronouncements, Merry-Go-Round has consistently blamed its woes on external forces. Mr. Sullivan continued to do so in his statement yesterday, citing "a lack of confidence in the economy and no discernible fashion trend" as important factors behind the "disappointing" results.

"What they can control, they've done very well," said Steve Ashley, a retail analyst with Cleary Gull Reiland & McDevitt in Milwaukee.

But some analysts think some of Merry-Go-Round's most serious problems are of its own making -- particularly the decision to purchase the Chess King chain from Melville Corp.

"Here's a store that's tanking and it goes out and acquires hundreds of stores. . . . Obviously it's been a debacle," said Mr. Davidowitz. He suggested that Merry-Go-Round might need to undergo a sweeping restructuring, including many store closings, in order to get back on track.

Merry-Go-Round Enterprises Inc.

ZL.. .. .. .. .. .. .. .. .. .. Ticker .. .. .. .. .. .. .. .. .. Yesterday's .. .. .. .. .. .. .. .. .. .. Symbol .. .. .. .. .. .. Cls. .. .. .. .. Chg.

.. .. .. .. .. .. .. .. .. MGR .. .. .. .. .. .. .. 7 7/8 .. .. .. .. .. Unch.

Period ended

July 31 .. .. .. .. .. .. .. 2nd qtr. .. .. .. .. Year ago .. .. .. .. Chg.

Revenue .. .. .. .. .. .. .. $214,412 .. .. .. .. .. $181,630 .. .. .. +18.0%

Net Income .. .. .. .. .. .. ($2,519) .. .. .. .. .. $6,380 .. .. .. .. -- Primary EPS .. .. .. .. .. ($0.05) .. .. .. .. .. .. $0.12 .. .. .. .. --

.. .. .. .. .. .. .. .. .. 6 mos. .. .. .. .. .. Year ago .. .. .. .. Chg. Revenue .. .. .. .. .. .. .. $400,339 .. .. .. .. $353,023 .. .. .. .. +13.4%

Net Income .. .. .. .. .. .. ($544) .. .. .. .. .. $13,467 .. .. .. .. --

Primary EPS .. .. .. .. .. .. ($0.01) .. .. .. .. $0.25 .. .. .. .. .. --

Figures in thousands (except per share data.)

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.