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Shopping Forever 21

BY Marianne Wilson

I’m always asking people what their favorite store is. (I like to think of it as research for my job, although one or two of my pals say I’m just naturally nosy.)

Their answers are often surprising. More than that, they also offer insights into the state of retailing today. For example, take my friend Kim, who lives in southern New Jersey.

Kim, who is on the late side of fortysomething, is in the know when it comes to what’s happening in retail and fashion. She likes to shop, and is always up on trends. Her teenage daughter helps her in that regard.

For the past year or so, Kim’s favorite store has been Forever 21. At first, she said, she was embarrassed to be seen shopping there, and would pretend that she was trying on things to buy as presents for her daughter. But lately, she has become more relaxed.

“I’m not so self-conscious about it anymore,” Kim told me. “And I’ve noticed a lot more adults shopping there lately, at least on weekdays.”

There is no big mystery as to what Kim—or younger clientele for that matter—finds so appealing about Forever 21: bargain-priced copies of just-off-the runway hits and other trend-driven fashions.

“You can get some incredible buys of the most current fashions,” Kim said.

As for shopping alongside teens, it doesn’t bother Kim anymore. In fact, it energizes her. “It’s more fun, more democratic,” she said.

The chain came up again, about a month ago, when I participated in a mentoring program. Left with some time to kill, I decided to do a mini-focus session with my audience: a group of high-school girls. When I asked where they liked to shop, they started calling out names all at once. But Forever 21 dominated the discussion.

“You get a lot for your money,” one girl said. “And it has all the latest styles that you see on TV and in magazines.”

Another said: “There’s always new stuff to try on.” Most of the girls nodded.

I did a small feature on Forever 21 in the December 2004 issue of this magazine, when its founders and owners Don and Jin Chang, who immigrated here from South Korea in 1981, were honored in the annual Ernst & Young Entrepreneur of the Year awards. The chain had been flying under the radar for some time, and I got the impression back then that was just fine with its low-profile owners.

The Changs still prefer to stay out of the spotlight, but their company has raised its profile considerably. In fact, the privately held, Los Angeles-based chain has exploded into a retail powerhouse, with some 400 stores and an estimated $1 billion-plus in annual sales. It has added two new formats: For Love, an accessories-only concept, and Forever XXI, a larger footprint store with expanded offerings.

To my mind, Forever 21’s success speaks volumes about the changing apparel retailing landscape. It’s an environment where speed is of the essence and disposable fashion is the way to go. While European players such as H&M and Zara seem to garner all the attention, it is Forever 21 that has the notion of cheap-chic down pat. The majority of its fashions are made in Southern California, ensuring it a turnaround that none of its rivals can match. It is also priced below its competitors.

If shopping at Forever 21 sometimes involves sacrificing quality for style, that’s just fine with my friend Kim and the teens I spoke with.

Or, as one of the teens told me, “I go there so that I can look cool. End of story.”

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Sears comps hurt by energy costs

BY CSA STAFF

HOFFMAN ESTATES, Ill. Sears Holdings today reported net income of $216 million, or $1.40 per diluted share, for the first quarter ended May 5, compared with net income of $180 million, or $1.14 per diluted share, for the first quarter ended April 29, 2006.

“In part, our domestic operating results reflect the impact of some of the same challenges being faced by our customers, such as rising energy costs and a slower housing market,” said Aylwin Lewis, Sears Holdings’ ceo and president. “However, as an organization, we need to overcome these factors by better controlling costs and developing innovative solutions that better meet our customers’ needs and allow us to generate a more reasonable level of profitability even in the face of such challenges.”

Domestic comparable-store sales declined 3.9% during the first quarter of fiscal 2007. Sears domestic comparable-store sales declined 3.4% for the quarter, while Kmart comparable-store sales declined 4.4%. We believe these declines reflect both increased competition and the impact of external factors such as rising energy costs, a slower housing market and poor weather conditions during the latter part of the first quarter of fiscal 2007. Kmart experienced lower transaction volumes across most merchandise categories, most notably within home goods, health and beauty products, and food and consumables. Similarly, Sears domestic recorded comparable-store sales declines across most merchandise categories and formats, with a notable decline in home appliance sales, which we believe reflects both a slower U.S. housing market and the impact of increased competition.

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Big Lots 1Q net sales up 3.4%

BY CSA STAFF

COLUMBUS, Ohio Big Lots today reported first quarter fiscal 2007 income from continuing operations of $29 million, or 26 cents per diluted share, compared to income from continuing operations of $14.5 million, or 13 cents per diluted share, in the first quarter of fiscal 2006. Including the impact of discontinued operations, first quarter fiscal 2007 net income totaled $28.8 million, or 26 cents per diluted share, compared to $13.7 million, or 12 cents per diluted share, in the prior year.

Net sales for the first quarter ended May 5, increased 3.4% to $1.13 billion, compared to $1.1 billion for the same period in fiscal 2006. Comparable-store sales for stores open at least two years at the beginning of the fiscal year increased 4.9% for the quarter.

For the second quarter 2007, the company expects income from continuing operations of 7 cents to 10 cents per share versus income from continuing operations of 4 cents per share last year. Comparable-store sales are expected to increase 2% to 4%, compared to a 5.2% comparable-store sales increase recorded last year.

For fiscal 2007, the company expects income from continuing operations of $1.25 to $1.30 per share versus income from continuing operations of $1.01 per share last year.

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