Merry-Go-Round Enterprises Inc. disclosed new details about its latest attempt to put the right fashions in its stores and, as expected, reported a multimillion-dollar loss for its third quarter.
The Joppa-based retailer said its DJ's chain of 322 stores will abandon an attempt started earlier this year to appeal to older men with more conservative tastes. Instead, DJ's will return to its traditional customers: fashion-oriented young men.
Merry-Go-Round also will carry fewer lines of clothes -- but with more sizes and colors within those lines -- in its Chess King and Merry-Go-Round stores, the company said. The company operates 1,227 stores.
Severe problems for Merry-Go-Round Enterprises began in 1993,
when baggy, "hip-hop" styles failed to sell, pushing the company into bankruptcy court in January.
Looking for a niche, the retailer moved away from a longtime role as the source for high-fashion, cutting-edge teen togs. It began carrying more-traditional, "preppier" styles last summer.
But sales have continued to slide. Yesterday, Merry-Go-Round said revenue in stores open for at least a year fell by 14.5 percent for the three months that ended Oct. 29, compared with the same period in 1993.
Last month, Merry-Go-Round hired a new chief executive, Thomas Shull, and a new chief operating officer, James Kenney. Both men had worked for department-store chain R. H. Macy & Co. Merry-Go-Round's latest merchandising moves bear their fingerprints, said Peter A. Chapman, head of Bankruptcy Creditors' Service Inc., a newsletter publisher and bankruptcy investor.
At Macy, which is also in bankruptcy, Mr. Kenney preached that troubled companies should return to their "core competencies" and beware of new, unfamiliar avenues, Mr. Chapman said.
He said the strategy of the two officers is: "Take what you had, reduce the size of it, cut it back to its profitable size and then exploit it as much as you can. Focus on what you know. It's not the time to experiment."
Company officials were unavailable for comment yesterday.
But in previous interviews, they have disclosed other apparel tactics. The efforts include continuing the placement of more women's merchandise in the 491-store Merry-Go-Round division; adding well-known men's brands in the 78-store Cignal chain; testing "men-only" and "women-only" Merry-Go-Round stores and reducing the number of suppliers.
The company laid off 70 people -- one-tenth of its Joppa work force -- last week. Mr. Shull has said Merry-Go-Round could close more stores and make more layoffs after the holiday buying season. It has already closed more than 200 stores this year.
Also, the company said yesterday that it will "aggressively" mark down its clothes after the holidays to clear out old merchandise. The move will hurt profit margins for the quarter that ends Jan. 31, Merry-Go-Round said.
Merry-Go-Round had a net loss of $10.3 million, or 19 cents per share, for the quarter that ended Oct. 29. That compared with a net loss of $38.5 million, or 71 cents per share, for the same quarter in 1993, when the company took a $35.1 million charge to write unsold goods off of its books.
Revenue for the latest quarter declined by 22.1 percent, to $199.1 million -- the result mainly of fewer stores in operation.
Cash flow -- a common measure of fiscal health for companies in bankruptcy proceedings -- fell to $500,000 in the third quarter compared with $4.1 million for the same period last year.
Cash flow for the nine months ended Oct. 29 was negative $21.9 million, compared with positive $31.1 million for the first three quarters of fiscal 1993.
Merry-Go-Round's stock closed at 81.25 cents yesterday, up 6.25 cents.