Merry-Go-Round Enterprises Inc.'s second-quarter performance furthered the earnings slide which has plagued the retailer throughout the year, but the company is hoping that planned merchandise shifts and a new marketing campaign will boost sales in the second half of 1994.
The Joppa-based clothier reported a net loss of $37.9 million, or 70 cents a share, on sales of $176 million in the second quarter ended July 30. The sales figure represents an 18 percent decline from the comparable period last year, when sales topped $214 million and the net loss amounted to $2.5 million.
Average sales per store fell 14.6 percent, but the more important same-store sales fell 19.7 percent, the company said.
Merry-Go-Round attributed part of the loss to $20.4 million in reorganization costs associated with the company's bankruptcy case. The retailer sought Chapter 11 bankruptcy protection from creditors in January after it was unable to meet commitments to suppliers and stem a continued drop in sales at languishing stores.
"The loss before the special charge was in line with our projections," said Merry-Go-Round President Michael Sullivan. "We had anticipated the second quarter would not be good, and it's usually our softest quarter anyway."
Since the filing for reorganization, the retailer has closed 169 of its stores and plans to shutter another 28 by the end of this month, representing 14 percent of its total outlets. Much of the charge will cover the rejection of store leases and the subsequent write-off of assets from those locations.
The loss also was compounded by a strategic shift in merchandise at its DJ's/Attivo outlets -- where the company has attempted to appeal to older, more conservative customers -- and by resulting lower traffic figures and inventory levels.
"We wanted to eliminate some of the duplication, and while we knew it would take time -- because you would alienate some customers and it takes time to attract new customers -- it's going a lot slower than we had hoped, quite honestly," Mr. Sullivan said.
The sluggishness has even led Merry-Go-Round to consider modifying the mainstream concept in favor of its traditional alternative approach for the upcoming Christmas shopping season, when most retailers generate more than 75 percent of their annual sales.
"I think they can't figure out who their customer is anymore, and therefore, can't figure out what to buy," said Peter A. Chapman, president of Bankruptcy Creditors Service Inc., a Princeton, N.J., firm that has tracked its progress. "Every quarter that they continue to make merchandise shifts, they're going to lose base customers.
But Mr. Sullivan pointed to positive response to Merry-Go-Round's $7 million advertising campaign kicked off in August and the general increase in mall sales nationwide as reasons for optimism. Additionally, the retailer has $57.6 million in cash to purchase goods and access to a $125 million credit line.
For the first half of the year, Merry-Go-Round posted a net loss of $62 million, or $1.15 a share, on sales of $345 million. The numbers compared to a $544,000 loss, or 1 cent a share, on sales of $400.3 million in the previous six-month period. Average store sales dropped 25 percent, while same store sales declined 22.8 percent.
Merry-Go-Round's stock closed up 12.5 cents at $1.75 yesterday.