Merry-Go-Round: New boss in sight?

June 13, 1995|By Jay Hancock | Jay Hancock,Sun Staff Writer

Merry-Go-Round Enterprises Inc., the troubled national fashion retailer based in Joppa, is close to choosing a respected manager from R. H. Macy Co. as its next chief executive, knowledgeable sources said yesterday.

Richard Crystal, who runs Macy's Aeropostale and Charter Club boutique chains, has tentatively agreed to join Merry-Go-Round, the sources said. Mr. Crystal, who also is head of product development for Macy, would take over from Thomas Shull, the "crisis manager" who has been Merry-Go-Round's temporary CEO since November.

It was unclear yesterday how soon the transition would happen if the parties strike a deal. Merry-Go-Round, which operates 1,000 mall apparel stores and recorded $783 million in sales last year, has said it hopes to have a new CEO named by June 30 or soon afterward.

A Merry-Go-Round spokesman declined to comment yesterday. Mr. Crystal did not respond to phone messages left with his Macy office in New York.

Retail experts who know Mr. Crystal, 50, praised him as a seasoned merchant with proven fashion sense.

"He's a good man. Aeropostale is very successful," said Howard Davidowitz, chairman of Davidowitz & Associates Inc., a retail consultancy based in New York. "I would rate him highly."

Fashion savvy is a skill that analysts believe Merry-Go-Round could use in a new CEO. The chain's sales have relentlessly fallen over the last two years, forcing a Chapter 11 bankruptcy filing in January 1994.

Mr. Shull, who once was Mr. Crystal's boss at Macy, has a background in finance and marketing, not clothes picking. He has sharply cut costs and closed hundreds of poorly performing stores. But Merry-Go-Round, which once made big profits by predicting the fickle apparel tastes of teens and young adults, continues to suffer sales declines.

Aeropostale sells men's and women's sports and casual wear in more than 60 stores with an aviation theme. It is often compared to the Gap and Banana Republic, both owned by Gap Inc. Charter Club, with about 30 stores, sells women's careerwear and is similar to Talbots.

Together, the stores have generated much higher profit margins than Macy's main, department store business, said people familiar with the operations.

"As far as margins are concerned, Aeropostale and the specialty stores were just doing phenomenally," said a former Macy manager who spoke on condition of anonymity. Mr. Crystal, the manager said, "is perceived as a doer. He's very creative. He's worked with his creative staff a lot to develop new product lines."

As chairman of product development, Mr. Crystal is in charge of private-label brand programs for all of Macy, which was bought last year by Federated Department Stores Inc. His other Macy title is president of specialty stores. He joined the company as a buyer in 1972.

He would be the second successive former Macy executive to operate Merry-Go-Round. Mr. Shull was Macy's executive vice president and No. 2 manager until last summer, when he resigned to pursue management consulting as the Federated buyout loomed.

For the fiscal year ending July 30, 1994, Aeropostale and Charter Club generated $110 million in sales, according to Bankruptcy Creditors' Service Inc., a Princeton, N.J., company that publishes newsletters on Macy, Merry-Go-Round and other Chapter 11 cases.

Merry-Go-Round had a net loss of $186.3 million for the year ended Jan. 28 and continues to bleed cash and lose key employees.

In court documents, Merry-Go-Round estimated that the new CEO's salary for the first year will be $450,000. Mr. Millman, who specializes in retail recruiting, said the salary is likely to be at least $500,000, with a chance of doubling with incentive bonuses.

Mr. Crystal is one of several CEO candidates being considered by Merry-Go-Round's board but is the top choice among shareholders and creditors, according to people close to the company. Other candidates include Frank Tworecke, who runs the retailer's Merry-Go-Round and Cignal stores, and Lou Spagna, who is in charge of Chess King, Dejaiz and other men's stores.

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