Delia's Plans 25% Growth

NEW YORK CITY-Delia’s, a retailer specializing in the 12-to-19 age group, plans a 25% increase in square footage of its retail stores next year as it switches to its new format. Company CEO Robert Bernard, commenting during a conference call with financial analysts, said “We expect our store square footage growth rate next year to be a minimum of 25%.”

Delia’s, spelled dELiA*s, operates three brands: Delia’s, which ended the quarter with 73 units, including two outlet stores; and Alloy and CSS, which market direct via the internet and catalogs. Alloy offers teen apparel, and CSS features footwear, and also sells apparel and accessories, primarily in skate and snow categories.

Bernard says that the company will finish this year with 75 stores, and in 2007 the company will reduce the number of old-format stores to 37 after finishing fiscal 2006 with 44 old-format locations. The company expects that at the end of this year, 31 of its locations will be in its new format and the two remaining outlets will be closed. Store changes also will include some closings, some relocations and some remodelings.

By year-end, 31 of the Delia’s units will have been converted to a new format, introduced little more than a year ago. Eight of them are included in the third-quarter comp-store results, and ten will be included by fourth quarter. He declined to quantify performance in new-format stores, but said 20 more will be in place in 2007, “hopefully by back-to-school.” Their conversion “will be sandwiched in with new store openings.” The two outlet units will be closed in 2007.

The retail division of Delia’s Inc. turned a corner the first week of September when weekly comp-store performance tipped positive. The momentum continued, providing the teen apparel seller with a gain of 5% for the quarter ended Oct. 28. The chief driver of comp-store gains “was knitwear,” says Bernard. Dress sales at stores were also strong.

Overall revenue increased 12% to $67.5 million in third quarter. Retail sales led the rise with an increase of 26.4% to reach $28.1 million, compared with $20.5 million for the same quarter a year ago. Direct sales rose 4.6% to $41.7 million, up from $39.9 million in the comparable year-ago quarter.

Bernard acknowledged “weakness” in Alloy sales. “The customer is more price-sensitive and more of a fashion follower. It didn’t pick up on the skinny pant fashion that was so strong for Delia’s and did not capitalize on the explosion of dress business like Delia’s did.” Correcting course, he says, will be driven by determining the answer the question: `What does the customer want that she does not have?”

Without disclosing particular plans for CSS, he said it put up a website in June, specifically to make girls aware of CSS and ask for their emails. “We’ve received over 200,000 names thus far. The next step will be a test mailing of 300,000 or so before we decide what’s next.”

Shares of DLIA on the Nasdaq closed at $10.50 a share, up 2.4% on Dec. 6. The 52-week high is $11.53 a share and the 52-week low is $6.61 a share. Locally based Delia’s was spun off from Alloy Inc., a media marketing and services company, in December 2005.