Tween Blames School Start for 2% Comp Drop

NEW ALBANY, OH-Executives at Tween Brands Inc., the owners of the Limited Too and Justice chains of young girl apparel, reeled from hard questions during a conference call Wednesday that discussed a comparable store sale decrease of 2% for the second quarter, compared to Q2 2006. Net sales increased 15% to $213.7 million for the company, attributable to a 15% increase in store count. Poor sales aside, the executives said this is the first bad quarter in four years, and they are still on track to open up to 135 new stores this year.

Mike Rayden, chairman and CEO, said in the call that the company failed to meet expectations because it underestimated the impact of schools in many markets moving their back-to-school start dates later, as well as the current softness in retail. “We don’t intend to make excuses for our miscalculation,” Rayden said during the call. “Our analysis clearly underestimated those shifts. We are also experiencing a decline in transactions; these are infrequent shoppers who are not making as many trips to the mall, whether it be because of higher gas prices, mortgage costs or whatever.”

The company is estimating earnings per diluted share for the third quarter ending Nov. 3 of 40 cents to 45 cents, below the 58 cents per diluted share reported for the like period last year. The reason is a revised estimate of the calendar shift on the company’s quarterly sales and earnings comparisons. In accordance with the 2007 retail calendar, the third quarter shifted the higher sales volume first week of August into second quarter, and moved the lower volume first week of November into third quarter.

Justice opened 29 new stores during the second quarter, ending the period at 213 stores, an increase of 98 stores over last year. Limited Too opened four stores in the quarter, remodeled 16 and closed one, ending the quarter 573 stores. “”We plan on opening 100 to 105 new Justice stores in 2007, and are delivering a store that will be 15% to 20% larger,” says Ken Stevens, president and COO. “We also plan to open a net increase of 25-30 Limited Too stores, and complete 40-50 remodels.”

Rayden said the recent numbers are not a sign that the business is suffering. “We believe that over the long term that this concept is working. Every now and then in retail there’s a blip. We have no plan at all to slow down growth, and we’re moving forward on a third concept. It’s been a difficult quarter, no question about it, but we believe we’ll have a positive fourth quarter.”