For Octavia, a winter of discontent

April 06, 1994|By Ross Hetrick | Ross Hetrick,Sun Staff Writer

Hurt by severe weather and increased competition, Octavia Inc., a specialty retail shop in the Village of Cross Keys, hopes it can return to profitability through a combination of increased customer service and broader selection -- a strategy that is increasingly being used in the fierce specialty apparel sector.

The 29-year-old company, known for its elegant and stately clothes and party dresses, filed for Chapter 11 bankruptcy on March 17, listing $371,499.72 in assets and $388,862.70 in liabilities. The filing came just two months after Nan Duskin, another upscale women's apparel store at the Cross Keys Center, also filed for Chapter 11 protection.

But whereas Nan Duskin's troubles came from an overload of debt, Octavia's problems stem from an old-fashioned dearth of customers during the last 2 1/2 months.

"There were minimal levels of revenues," said Hammond J. Dugan IV, the owner and president of the 5,000-square-foot shop. "It's a cash-flow situation."

Mr. Dugan primarily blames the harsh weather earlier this year that battered the open-air center. Even before that, however, the local women's apparel market had become "oversaturated" by the openings in recent years of such retail superpowers as Nordstrom and Saks Fifth Avenue, he said.

Octavia is the latest victim in an increasingly competitive specialty retail market which has claimed such shops as Rococo, Saeno and Daddy's Money. The marketplace has become particularly tough with the addition in the last few years of Nordstrom, the Seattle-based department store famous for customer service.

Nordstrom "totally blows people away," said Jennifer Black Groves, a retail analyst for Black & Co., a regional stockbrokerage firm in Portland, Ore. "It's hard to compete when you have somebody like them."

She said the effect of Nordstrom is to weed out the weaker performers, leaving those shops that are close to their customers and provide what they want. "You have to have it completely together," Ms. Groves said.

Beverly T. Matthai, the owner of FEMME Inc., a specialty women's clothing store on Charles Street, agrees that Nordstrom and other department stores have heightened the competition. "It's made local retailers get on their toes a little bit more," she said.

But she said the small shops can still prosper by providing service and styles that can't be found in what she calls the "homogenized" offerings at shopping malls. "To me, its like white bread, Wonder Bread," Ms. Matthai said.

Despite its short- and long-range problems, Mr. Dugan is optimistic about turning Octavia around. "We expect earnings to be healthier as we are better able to satisfy customers, specifically with the exclusive styles and service they demand," he said.

In the last two months, the store has hired three additional salespeople, boosting its total work force to 20, Mr. Dugan said. The store also plans to take 1,000 square feet of nonselling space and convert it to a new section catering to younger buyers and featuring cocktail and evening dresses for less than $450 each, he said.

The new section, scheduled for completion by Aug. 1, is the result of focus groups held by the store. "It's what we've been asked to do," Mr. Dugan said.

Octavia has adequate cash and supplier support to maintain its inventory, he said. "We have 100 percent support." The company also will cut costs though negotiations with creditors, Mr. Dugan said.

Started by Mr. Dugan's grandmother, Octavia Dugan, the store quickly established a reputation for service by Ms. Dugan going to New York to buy dresses for customers.

"She would hop on a train and get it," Mr. Dugan said.

Ms. Dugan continued to own and operate the store until 1989, when her grandson acquired the operation. This change also came during a general downturn in the apparel market nationwide.

"Every transition creates changes," Mr. Dugan said. "Maybe we made some decisions that weren't aligned with the marketplace," he said.

Octavia was one of the original shops in the 65,000-square-foot Cross Keys shopping area. The complex is part of a larger 73-acre residential, retail, office and hotel development off Falls Road, just north of Cold Spring Lane.

Cross Keys was an early project of the Rouse Co. of Columbia, the developer of the city of Columbia and such well-known retail centers as Harborplace and Faneuil Hall in Boston.

With only one vacancy at the 28-store complex, Cross Keys shopping area has been able to maintain a 96 percent occupancy rate, according to Rouse spokeswoman Cathy Lickteig.

Sales have been flat or down slightly in recent years. In December, however, they shot up 9 percent, she said.

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