Ever agonized on what to buy girls in that tough seven-to-14-year-old 'tween phase? That's what Too Inc. (NYSE:TOO) is all about, and today Reuters reported on the retailer's move to capture more of the market for that in-between age. If you've ever balked at high clothing prices for a kid under 12, Too has a new store with you in mind.
According to the news report, the company is launching a new off-mall concept called Justice, to the cheers of analysts. Apparently, this kind of Justice is served by offering merchandise similar to Too's, at prices 20% to 25% lower than those featured in the regular Too stores.
The move is seen as a way to grab some market share from less expensive venues like Kohl's (NYSE:KSS) and Target (NYSE:TGT). It makes sense. Kids grow out of clothes, and many parents don't want to shell out top dollar for something that's going to be outgrown -- or just out as opposed to in, given kids' fickle fashion tastes -- within the year.
Several weeks ago, Too reported a 30% decline in fourth-quarter earnings, with a 6% dip in same-store sales. However, it also gave a positive outlook for 2004, predicting a 45% to 54% increase in earnings.
The stock's now trading at 21 times forward earnings, and just shy of its 52-week high. If Justice can work up enough cool points to tempt kids, it could be a great boost to Too's earnings and revenue growth. However, if value-conscious parents insist on clothing their kids in Kohl's, Target, and Wal-Mart (NYSE:WMT) -- the same trip that they buy other household necessities -- then that could present a problem.
After all, the 'tween age is definitely one where kids need clothes, but it's also a phase with little autonomy. In the case of Justice, parental guidance could make a difference between hot... and not.
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Alyce Lomax does not own shares of any of the companies mentioned.
