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Justice fashion brand for teen girls

13
Aug '08
Tween Brands Inc announced that it will convert approximately 560 Limited Too stores across the country to its more value-oriented Justice brand to drive growth and profitability. Both brands sell fashion basics and lifestyle items to 7-14 year old girls.

Upon completion of the conversion by the end of the first quarter of 2009, the Justice chain, which has 310 stores and has averaged double-digit comparable store sales over the last 14 quarters, will have more than 900 stores nationwide. The Company will no longer operate any Limited Too stores in the United States following the conversion, but will continue to sell Limited Too branded product at select Justice stores.

By refocusing on one store brand, the Company expects to achieve annual after-tax savings of $20-$25 million, or $0.80-$1.00 per share. The Company notes that the expected annual after-tax savings of as much as $25 million include approximately $15 million from reduced headcount in the home office and approximately $9 million in reduced marketing and store operation expenses.

Anticipated 2009 capital expenditure savings as a result of remodeling 20-25 former Limited Too stores with the less expensive Justice store design package are expected to substantially fund the store signage conversion program. The Company's 2009 capital expenditures budget is now expected to be approximately $45-50 million.

The Company expects to record a charge of approximately $18 million, or $0.45 per share, in the second half of 2008 related to the brand transition including severance, removal of Limited Too signage, asset impairments related to IT and store closings.

Tween Brands plans to close 26 underperforming Limited Too stores by the end of fiscal 2008 and monitor an additional 90 former Limited Too locations for possible off-mall relocation under the Justice brand. In a limited number of prior conversions from Limited Too, the new Justice stores have done equal or more volume, and in a few cases, significantly more.

“This is a bold strategy to capitalize on the tremendous success of Justice and the changing trends in our economy and our customers' preferences,” said Tween Brands chairman and chief executive officer Mike Rayden. “Especially in these tough economic times, our customers are seeking the more value-oriented apparel available at Justice, which is priced on average approximately 20-25% lower than Limited Too.”

Noting that the Limited Too brand was established in 1987, Rayden continued: “Limited Too was the brand that introduced great fashion to tween girls, but our customers are looking for the next great thing and their parents want more value for their dollar.

We believe Justice fits that bill as evidenced by strong sales comps at Justice and weaker comps at Limited Too, including this quarter's results. In fact, from fiscal year 2005 to fiscal year 2007, overall net sales at Tween Brands have increased 34%, yet our operating income has increased only 2% due in large part to the significant investments we have made to differentiate Justice and Limited Too.


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