Retail Industry Update by Risa Kaplan (MF Nanny) San Francisco, CA (May 1, 1997) -- First the numbers. Two closely-watched weekly readings released Tuesday gave a mixed reading on the state of retail sales for the week ended April 26. LJR Redbook Research, said on an unadjusted basis, sales in the week ended April 26 were up 5.6% from 1996. The BTM/Schroders Retail Chain Store Sales Index, meanwhile, fell 0.7% in the week ending April 26 from the week before, on a seasonally-adjusted comparable store basis. LJR Redbook Research's latest indicator of national retail sales shows sales up 0.2% in the first three weeks of April from March. The report also shows seasonally adjusted sales in the 3-week period up 6.1% from the same period in 1996. But LJR Redbook staff said the performance continued the softening trend which has been apparent since the first week of April, when the retailer sample fell behind plan. BTM/Schroders said sales were generally below plan for most retailers for the week and the sales index was below its 16-week rolling trend. As the Maypole streamers, danced in the wind at the school behind me, I started to daydream about summer and then yikes I remembered all those kids, with no more school in a few weeks . What would they be doing? In 1996, kids between the ages of 10-19 years old had discretionary spending in the amazing amount of $81 billion, according to a recent article in Barrons. So what are the kids buying and where are they spending their parents hard earned money? Since the demise of grunge last year and the introduction of the movie "Clueless", teenage girls (known as Generation Y) have turned in their raggy jeans, oversized shirts, and sneakers. The new movie "Romy and Michele's High School Reunion" has the girls wearing plastic fruit and loud, cute, skin-tight clothes and lots of makeup. The fashion magazines no longer show girls unfeminine, looking pretty has come back. Years ago, my daughter Brittany, at the age of three, stood at the Chanel counter at Bonwit Teller's and knew exactly where all the goodies went. Blue on her eyes, red on her cheeks and pink on her lips (it must be inbred). Now at 11 her "fun" makeup is scattered all over the bathroom and she always wants to buy more. (She still isn't allowed to wear it out of the house). But recently she complained that there was no makeup for girls her age; well, it seems makeup companies must have been listening. REVLON <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: REV)") else Response.Write("(NYSE: REV)") end if %>, the No. 1 mass-market makeup company in the U.S., has just introduced a line of makeup exclusively for girls. Looking similar to the more expensive line sold in department stores called Urban Decay, it may turn in time turn Revlon's cheeks rosy. Last week Revlon reported it trimmed its net loss for the first quarter, as sales rose 6%. New York-based Revlon reported a net loss of $25.5 million, or $0.50 a share, compared with a year-ago loss of $35.7 million, or $0.79 a share. Eight analysts surveyed by First Call had a mean estimate for a loss of $0.53 a share for the current period. Revlon, which is 83%-owned by investor Ronald Perelman, said sales rose to $492.5 million from $464.3 million a year ago. The company attributed the latest quarter's narrower loss to growth in the color cosmetics category in the U.S. and expanded distribution overseas. In Europe and Asia, the hottest beauty products are those manufactured by American companies. Perhaps that is what is motivating beauty companies to look directly outside the US for growth. Revlon CEO George Fellows said he wants to boost international sales to 60% of the company's total, from the current 42%. Maybelline has also started a teenage brand called Miami Ice, however they are owned by the French cosmetic company L'Oreal and is traded on the European market. My credit card is very grateful that DELIA*s <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DLAI)") else Response.Write("(Nasdaq: DLAI)") end if %>, a new mail-order house, has not found my daughter yet. She is the queen of catalogues and loves to mark all the things she wants, hand me the book, circle the 1-800 number and say CALL. Through its uniquely styled catalogs designed to resemble a teen fashion magazine, the company offers a strategic mix of both recognized and emerging brands, complemented by dELiA*s own branded products. The company's products are marketed to girls and young women between the ages of 10 and 24 throughout the US, Canada, and Japan. Its products include jeans, shorts, t-shirts, woven and knit dresses swimwear, sunglasses, watches, costume jewelry, and cosmetics with an overall strategy of providing a mix of recognized brands and their own product line. Christopher Edger COO, and co founder of dELiA*s said, "An important element of our strategy has been to grow the dELiA*s brand, and we continue to be pleased with the performance of dELiA*s branded products." Obviously the more merchandise that is sold as private label could increase gross margins. For the FY ending 1996, this company announced record sales and earnings for the fourth quarter and the fiscal year ended January 31, 1997, Net sales for fiscal 1996 increased 435% to $30,225,000 from $5,652,000 for fiscal 1995. Pro forma net income increased to $2,307,000 in 1996, from $18,000 in 1995. Pro forma earnings per share grew to $0.23 per share on 10.2 million shares outstanding, from $0.00 per share on 10 million shares outstanding at the end of fiscal 1995. Six consecutive profitable quarters and 12 consecutive quarters of sequential sales growth is driven by strong response rates and wider catalog distribution.In the mail-order business the list along with the merchandise sold is the key to big profits. It appears that dELiA*s' name and merchandise are rapidly gaining popularity in this target market. Their 'house list' of individuals who have either purchased from dELiA*s or have called directly to request a catalog has exploded. During the fourth quarter of fiscal 1996, dELiA*s mailed 3.25 million catalogs, up from 650,000 in the same period in 1995. What makes this list so important is that this database contains those names where the response rate and purchasing patterns are right on target. The probability of dELiA*s making a sale is greater than from the names gathered from other sources."It appears that funds from the public offering were invested early and aggressively in state-of-the-art systems infrastructure, to insure that dELiA*s is a efficient direct marketer. I called the 1-800 number, and was told from the lady taking orders that the biggest sellers are jewelry, and makeup. Perhaps only time will tell if dELiA*s is in an excellent position to achieve significant growth in both sales and profitability. The stock today closed at $17 unchanged. The merchandise line by WET SEAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WTSLA)") else Response.Write("(Nasdaq: WTSLA)") end if %> had improved substantially and now has the numbers to prove it. On one of my adventures to the mall back in January, I noticed that the spring line was very attractive. This apparel retailer expects to post a first-quarter profit that will be almost double what analysts had been expecting. The company, which currently operates 363 stores, said it plans to open an additional 75 stores this year. It would be the second straight quarter the retailer beat analysts' earnings forecasts. In the fiscal fourth quarter, Wet Seal posted earnings of $0.51 a share, topping the mean estimate of analysts surveyed by First Call by five cents. Friday, Wet Seal said it would post net income of $0.23 a share for the fiscal first quarter ending April 30, up from six cents a year ago. Analysts surveyed by First Call have a mean estimate of $0.12 a share for the quarter. This stock which took a major beating in the fall closed today at $24 7/8 up 1/8. In an attempt to also expand into the hot teenage market PACIFIC SUNWEAR OF CALIFORNIA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PSUN)") else Response.Write("(Nasdaq: PSUN)") end if %> is looking to aggressively to expand its stores, which sells casual-apparel, accessories and footwear. Last Friday, it announced plans to open 50 new stores in 1997 and 60 new stores in 1998. In total, the company would be operating about 260 stores at the end of 1997, and 320 stores at the end 1998. The company also said it will expand or relocate 10 to 15 stores in 1998, in existing malls, to a larger 3,000-square-foot format from about 2,000 square feet to accommodate the addition of junior merchandise and footwear. Pacific Sunwear said the company targeted its most productive stores for expansion or relocation. March same-store sales rose 26%. The company said total sales for the five-week period ended April 6 were $16.9 million, a 50% increase over sales of $11.3 million for the week ended April 7, 1996. Same-store sales, or sales at stores open more than a year, rose 22% for the nine weeks ended April 6 and total sales were $26.1 million, an increase of 46% over sales of $17.9 million for the first nine weeks of fiscal 1996. PSUN traded at $32 up $3/4. HOT TOPIC ( Nasdaq: HOTT) is a mall-based specialty retailer of music-licensed and music-influenced apparel, accessories and gift items for young men and women principally between the ages of 12 and 22. The company currently operates 74 stores in 21 states throughout the Western, Midwestern and Northeastern regions of the United States. Hot Topic Inc. most recently reported record results for the fourth quarter and the 1996 fiscal year ended Feb. 1, 1997. It made the earnings surprise list for April 3, provided by Zacks Investment Research by beating out estimates of $0.39. Net income for the company in the fourth quarter approximately doubled, reaching $2,000,000 or $0.41 per share compared to $1,030,000 or $0.33 per share for the fourth quarter of the last fiscal year. Net sales for the fourth quarter (13 weeks) increased 65% to $16,429,000 from $9,958,000 for the fourth quarter (14 weeks) of fiscal 1995. Comparable-store sales increased 7.4% for the comparable 13-week period. For the fiscal year ended Feb. 1, 1997, net income increased to $2,570,000 or $0.67 per share compared to $436,000 or $0.14 per share for fiscal 1995. Net sales for fiscal 1996 were $43,618,000, an increase of 85% from net sales of $23,632,000 for fiscal 1995 (53 weeks). Comparable-store sales increased 8.9% for the comparable 52-week period. At the end of fiscal 1996, the company operated 68 stores, compared to 42 at the end of fiscal 1995. At the beginning of March, Alex. Brown said it initiated coverage of Hot Topic Inc. as a strong buy. The stock closed today at $25 1/8 down $5/8. STEVE MADDEN, INC.<% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SHOO)") else Response.Write("(Nasdaq: SHOO)") end if %> sells women's footwear and targets a youthful, fashionable, trend-setting clientele. Sold under the Steven Madden, David Aaron, or Dive product names, the shoes range in price from $59-$120 a pair and are sold in department stores, footwear boutiques, catalogs, and company-owned stores, including the original store in Manhattan's SoHo district. The company opened the first six, of the planned 40, new 1997 stores earlier this month, Steven Madden, the company's founder and principal designer, introduces four new product lines a year for a collection that covers a variety of styles, including clogs, pumps, boots, and sandals. Rhonda J. Brown, chief operating officer, stated: "The success of Steve Madden Footwear has accelerated the demand for more product lines with the Steve Madden label. The phenomenal equity of the Steve Madden name with young female consumers will drive a major expansion and licensing roll-out." Steve Madden Ltd. recently announces signing of licensing agreement with Colors In Optics Ltd. for sunglasses and sunglass accessories and the signing of licensing agreement with Magnum Fashions Inc. for handbags and leather goods. The company has reported that 1997 first-quarter same-store sales increased 23.2 percent to $799,979,000, compared with $649,000,439 last year. This retailer's stock closed at $4 up 1/4. After the close on Thursday, Steve Madden announced operating results for the first quarter ended March 31, 1997, exceeding analysts' expectations. Revenues for the first quarter of 1997 increased 69% to $13,218,000 from $7,808,000 in the like period of 1996, exceeding analysts' expectations. Net income for the quarter was $400,857 or five cents per share, on 10,351,584 weighted average shares outstanding, as compared with $807,000 or nine cents per share on 9,989,075 weighted average shares outstanding in 1996. RETURNS, EXCHANGES and REFUNDS Smith Barney Inc. recently initiated coverage of 10 retail stocks. "Outperform" ratings were given to TALBOT'S (NYS: TLB), ROSS STORES, INC <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ROST)") else Response.Write("(Nasdaq: ROST)") end if %>, LANDS' END <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LE)") else Response.Write("(NYSE: LE)") end if %>, INTIMATE BRANDS INC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IBI)") else Response.Write("(NYSE: IBI)") end if %>, GAP INC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GPS)") else Response.Write("(NYSE: GPS)") end if %> and TJX COS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TJX)") else Response.Write("(NYSE: TJX)") end if %>. LIMITED <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LTD)") else Response.Write("(NYSE: LTD)") end if %>, GYMBOREE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GYMB)") else Response.Write("(Nasdaq: GYMB)") end if %> and ANN TAYLOR <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ANN)") else Response.Write("(NYSE: ANN)") end if %> were rated"neutral." And GADZOOKS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GADZ)") else Response.Write("(Nasdaq: GADZ)") end if %> was given a "buy" rating. LUXOTTICA GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LUX)") else Response.Write("(NYSE: LUX)") end if %> gained $4 1/2 to $64 7/8 today after the Italian eyewear company reported Q1 EPS of $0.85, beating the sole estimate of $0.83. For the quarters ended March 31: Sales in 1997 were $418,700,000 compared to 1996 of $409,900,000. Net income was $38,300,000 over the 1996 $34,700,000. Same-store sales for the company's LensCrafters division rose 4.1%. COMPUSA, INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPU)") else Response.Write("(NYSE: CPU)") end if %> the nation's largest computer superstore retailer yesterday posted a 43% jump in fiscal third-quarter profit on a 19% improvement in sales. Net income of $32.7 million, or $0.35 a share, in the period ended March 29, compared with $22.9 million, or $0.25 a share, in the like period last year. Earnings were six cents a share better than the mean estimate of 16 analysts by First Call. Sales rose to $1.27 billion from $1.07 billion. Comparable-store sales, or sales at CompUSA's 95 stores open at least a year, improved 5.6%. The company released its third-quarter sales figures earlier this month. It said at the time the increases were a result of the introduction of machines based on Intel Corp.'s MMX microprocessors and new office productivity software from Microsoft Corp. It also said sales of corporate computers outpaced consumer sales in the quarter. Shares closed at $19 1/2 up 1/4. Next week "Stocks for Mom instead of Another Bathrobe" Remember your plastic -- "We never leave Fooldom without it."

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