It has been hit and miss for apparel retailers this season. But for Too
The top line grew by 18.7% compared with the same period a year ago. Same-store sales for Too sites increased a robust 10%, powered by a 9% increase at Limited Too and a 30% increase at its Justice stores. In the quarterly earnings conference call, management identified its fashion success as the reason for the strong sales. Also, a successful marketing campaign helped. Plans are in the works to expand its marketing strategy, particularly for its Justice stores; the first of a series of catalogs is set for release in August.
Less may be more with regard to Too's advertising. While management said one of the reasons for the recent success was its marketing efforts, it should be noted that the company has actually cut back on some of its advertising dollars. Operating margins improved year over year in large part because Too eliminated its spring television advertising; operating income as a percentage of net sales improved to 8.9%, up from 6.8% in the year-ago period.
Looking ahead, management indicated that inventory levels (up roughly 5%) are at appropriate levels. Core denim inventory has been ramped up in anticipation of a strong back-to-school season. Because the company is expecting the hits to keep on rolling, management is now projecting fiscal 2006 earnings to be $2.00 to $2.10 per diluted share, a 25% to 31% increase from 2005 levels.
There is no question that Too is on fire right now. Considering there are only 565 Too stores and 108 Justice units operating, there is plenty of room to grow. The company will increase its square footage by roughly 10% this fiscal year, as Justice adds 65 to 70 new stores.
The apparel retail market is a fickle one, but Too seems to have found the sweet spot, tailoring fashions for the tween crowd. If this company isn't already on your watch list, now is the time to add it.
Read on for more youth-oriented Foolishness:
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Not a tween but still want to talk about clothes? Join other investors on our discussion boards, including the one for Motley Fool Stock Advisor , which made Pacific Sunwear a recommendation.
Fool contributor Jeremy MacNealy has no financial interest in any company mentioned.