For women's fashion retailer Charming Shoppes (Nasdaq: CHRS), the quarter was a big one. Not necessarily good, but big.
Although cold-weather woes cooled many retailers off this quarter, Charming Shoppes found that its plus-sized business remained warm. Lane Bryant, the company's leading brand, saw flat year-over-year same-store sales, and its Fashion Bug stores -- while experiencing a 2% decline in comps -- saw the plus-sized side of things rise 7% from last year. Add in a 5% rise in comps at the Catherine stores (another plus-sized chain) and you've got some outsized businesses.
Unfortunately, the 7% rise in consolidated sales didn't fall to the bottom line. The cold weather caused Charming Shoppes to take bigger-than-expected markdowns leading to declining merchandise margins. Profits took a hit, falling 18% to $26.3 million, or $0.20 per share. While in line with analyst forecasts, it was compounded by declining sales at its troubled catalog business that's experiencing a longer-than-expected integration process.
Seems whatever Charming Shoppes was doing this quarter, it was doing it big.
It's not all that different than what many fashion retailers are reporting. Cato (NYSE: CTR) slipped last week. Ann Taylor (NYSE: ANN) had lower year-over-year profits, though it beat analyst estimates. And TJX (NYSE: TJX), the owner of TJ Maxx and Marshalls, reported that it also had to contend with the fallout from a massive security breach as profits tumbled.
What Charming Shoppes is doing differently is going retro. It's bringing back the Gitano jeans brand for exclusive distribution through its Fashion Bug chain. Immensely popular in the '80s and '90s, the brand fell off the map as internal problems wracked the company. Now as part of VF's (NYSE: VFC) Wrangler Apparel, it's hoping to make a comeback. Whether going back to the future will help Charming Shoppes is another matter, but it needs something to have customers check out clothing lines other than its plus-sized offerings. Maybe nostalgia will help.
Nostalgia is probably what investors are feeling for the stock price as it sits more than 20% off its highs. Offered at a large discount to most of its competitors on most measures, Charming Shoppes still has issues it needs to work out. The catalog business is stumbling right now, shoppers aren't buying its other offerings, and outlets opened near its Lane Bryant stores have cannibalized sales.
The big plus here is that its core business is strong. If Charming Shoppes can keep that intact -- and it looks to have those threads well in hand -- then any improvements in its remaining operations should help. While there might be some weakness exhibited yet in its stock price, Charming Shoppes' price is beginning to look charming indeed.
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Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.
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