Merry-Go-Round bets all on more mainstream fall

August 21, 1994|By Jay Hancock | Jay Hancock,Sun Staff Writer

The dad and son didn't mean to buy clothes at Merry-Go-Round last Wednesday.

They came to the shopping center for a compact disk. But walking through Security Square Mall, they spied a rack of flannel shirts in Merry-Go-Round's entrance. On special. Two for $49.

They picked out, tried on and paid up. A muted brown plaid for the dad; black and white houndstooth, with a silver zipper, for the teen-ager.

The store, the father said, "is on the cutting edge of fashion."

Such statements, scarce for many months near Merry-Go-Round cash registers, are sweet symphonies to the company's managers. It is no exaggeration to say that the survival of Merry-Go-Round Enterprises Inc. depends on how widely those sentiments are shared.

This is prime time for the big, Joppa-based apparel retailer. All during 1994, as the company has endured a bankruptcy filing, plunging sales and $35 million in operating losses through June, managers have pointed with hope toward this month, normally their second-biggest for sales.

By August, Merry-Go-Round's supply problems would be solved, they said. By August, buyers would have had enough time to build a decent fashion package for the important fall season. By August, sales would improve substantially.

August is here.

"It's put up or shut up," said New York fashion consultant Alan Millstein. "The back-to-school period is here, and the people in Merry-Go-Round's corporate offices have got to be biting their fingernails. . .The dice have been thrown. Even if it comes up even money, it may not be enough to save them."

Early signs are mixed, at best.

The delay of 15 percent to 20 percent of August shipments to the company's 700-store Chess King/Dejaiz division, reported last week, will hurt sales and further damage the credibility of managers who had promised a late-summer fix.

"Merry-Go-Round's position is, things are getting better. But they consistently haven't been making their plan. Their plan," said Howard Davidowitz, chairman of Davidowitz & Associates Inc., a prominent New York retail consultancy that once had Merry-Go-Round as a client.

"They have had the worst numbers in the retail business for a long time."

Fall deliveries for the company's 500-store Merry-Go-Round unit and its 80-store Cignal chain are on target, President Michael D. Sullivan said last week. Cignal's sales continue to exceed last year's levels, officials said. And sales in established Merry-Go-Round division stores have been "close to flat" in recent weeks compared with the same periods last year, Mr. Sullivan added.

That's progress in a year when companywide "same-store" sales have plunged by double-digit percentages every month. Merry-Go-Round Chairman Leonard "Boogie" Weinglass said that August results will be better than the 14 percent drop in same-store revenue for July.

But the company, which had $959.9 million in revenue last year, is still struggling.

Sales for last fall's season, which Merry-Go-Round is now sweating to duplicate, were terrible and pushed it swiftly toward a Jan. 11 bankruptcy filing. Corporate same-store revenue for August 1993 plunged 16 percent compared with the previous year, so Merry-Go-Round isn't setting any records by coming close to it now.

More conservative goods

The company is in a better position to make money, however, because store apparel supplies aren't as bloated as they were last fall.

Merry-Go-Round's turnaround strategy for merchandise, just now becoming fully apparent in the stores, will be a tough trick.

Two of its big chains -- Merry-Go-Round and Dejaiz/Attivo -- have substantially adjusted their identities, including adding more-conservative goods to their fashion mixes. It's partially a reaction to last year, when the company's far-out, baggy, "hip-hop" styles were shunned by young people, sparking the financial crisis.

The change is especially striking at the flagship Merry-Go-Round stores, whose staple for 26 years has been gaudy, trendy and frequently pricey teen togs.

The preppy plaids and solids and muted flannels and denims in Merry-Go-Round Enterprises' chains now are much closer to what mainstream America is buying -- but they're also on the shelf of almost every other boutique and department store in every mall.

The sluggish economy and lackluster apparel sales so far this year won't help, either.

Competition intense

"The competition is intense. That makes it very difficult for a company like Merry-Go-Round," said Kurt Barnard, president of Barnard Retail Consulting Group in New York. "Merry-Go-Round is very much in a corner and will have to demonstrate that it can pull its weight after all."

Merry-Go-Round's bosses, wearied by the bankruptcy process, stung by unrelenting criticism, wish Fifth Avenue and Wall Street would be more patient.

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