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Fashion chain suffers another drop in sales

THE BALTIMORE SUN

In yet another sign of the continuing deterioration at Merry-Go-Round Enterprises Inc., the Joppa-based fashion retailer yesterday reported a double-digit drop in sales in June.

For the four weeks ended July 1, the company registered $49 million in sales, down $15 million, or 23 percent, over the same period last year. Sales at stores open at least a year fell 15 percent.

Company officials declined to comment, but analysts were not shy about what the numbers meant.

"They're terrible -- I mean, 'terrible' is probably a charitable word," said Kurt Barnard, president and publisher of Barnard's Retail Marketing Report, a forecasting newsletter in New Jersey. "Merry-Go-Round is a retailer that has lost its market. The company has lost its customer base. It's searching for a new identity, and it doesn't have one. And that's why the performance is as dreadful as it is."

The national chain of 1,000 apparel stores geared for teen-agers and young adults has not reported monthly same-store sales gains in more than a year. Its best month since filing for Chapter 11 bankruptcy in January 1994 was April, when comparable-store sales were flat compared with the same period last year.

Overall sales were equally poor in May -- dropping by the same margin, 23 percent, from $48.7 million to $37.3 million, while same store sales fell 13 percent.

Hope of a turnaround lies in the appointment of Richard P. Crystal, an R.H. Macy & Co. executive, who was tapped last week as Merry-Go-Round's new president and chief executive, the fourth CEO in two years, pending approval today in U.S. Bankruptcy Court.

"He's either going to end up being Moses, or end up being one of the Joe Palookas of retailing," said Alan G. Millstein, editor and publisher of New York-based Fashion Network Report. "Crystal is going to need at least a year to 18 months to fix that which is broken."

Mr. Crystal may not arrive with enough lead time to salvage back-to-school sales, analysts said, which means the first opportunity for change under his leadership will come during the Christmas season.

But there's a lot to fix: The company lost $19.2 million for the first quarter ended April 29 and $186.3 million, or $3.45 per share, for the year ended Jan. 28.

"What you have is a business in an absolute free-fall," said Howard Davidowitz, chairman of Davidowitz & Associates Inc., a national retail consulting firm in New York. "It's burning cash at a tremendous rate."

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