California Apparel News

The arrival of flirty, feminine fashions earlier this year was welcome news to national specialty chains Charlotte Russe and Rampage and their parent company, San Diego–based Charlotte Russe Holding Inc.

The girly looks boosted sales for the company, which had slogged through 11 consecutive quarters of negative comparable-store sales since 2001. The company reported positive comparable-store sales for the second quarter of 2004, which ended in March.

The good business has continued, and Charlotte Russe Chief Executive Officer Mark Hoffman is expected to announce positive comparable-store sales during the company’s third-quarter earnings call on July 15. Company chiefs and analysts expect this change in fortune to foster a new era of solid growth for the juniors and women’s apparel retailer.

Charlotte Russe is also expected to announce that it will go forward with its stated goal of building more than 50 stores in 2004. The company currently runs more than 335 stores in 38 states and Puerto Rico.

Analyst Jeffrey Van Sinderen of Los Angeles–based B. Riley & Co. believes that growth is a wise idea.

“They have a small store base,” Van Sinderen said. “Assuming their business continues to strengthen, and that they’re comping positive, there’s considerable room for them to expand.”

The relatively contained expansion of 50 stores may pave the way for the company’s goal of growing to 500 Charlotte Russe and 200 Rampage stores nationwide, according to Hoffman.

The company will also reintroduce its private-label brand Refuge and expand Heart, Moon, Star, another private-label brand.

Business for Charlotte Russe did not look nearly as good a few years ago. Trouble started in 2001, when tastes shifted away from the feminine look, Van Sinderen said.

“There was a dearth of fashion drivers for the business. That really weighed on them,” he noted. “They could have executed better on fashion merchandise, but there was nothing for a year to 18 months.”

Charlotte Russe had its worst year in 2003, when the company closed all 10 of its young teen and tweens lifestyle accessory stores, Charlotte’s Room. Although business was lackluster, Charlotte Russe still managed well on Wall Street. The company earned 60 cents a share in 2003, compared with 95 cents per share in 2002.

Charlotte Russe hoped to change its fortunes by changing its management. The company promoted Hoffman to chief executive officer in July 2003, replacing Bernie Zeichner, who resigned from the position but stayed on as chairman of the board. The same year, the company hired Donna Derossiers, who had spent 20 years retailing young women’s fashions in Canada, as the general merchandising manager of Charlotte Russe. The company also hired Brad Cunningham as the general merchandising manager of the Rampage division.

Hoffman told analysts at Wachovia Securities’ 14th annual Nantucket Equity Conference, held June 24 in Nantucket, Mass., that the new hires solved a big problem at the company.

“Over the last couple of years, we let the Rampage brand migrate much too closely to Charlotte Russe, and we’ve compromised the success and the integrity of that brand,” Hoffman said. “We believe we’ve made progress in differentiating Rampage versus Charlotte Russe and will make a significant change in opening for Fall season and opening Holiday season.”

—Andrew Asch