US merchants pull plug on secondary lines to cut costs

Bangalore, Maine: The recession is forcing many US retailers to focus on their key brands and pull the plug on secondary lines - a move that could have the added benefit of helping them return to their more successful roots.

In boom times, retailers flirted with hipper styles and unconventional fashions to differentiate themselves or woo shoppers across various age groups. However, things are changing now as they struggle to find new ways to cut costs in the slump.

"It is very smart for individual retailers to pull the plug at this point because the time-horizon for these [secondary] concepts to break even has grown substantially as consumer spending has slowed," Boenning & Scattergood analyst Holly Guthrie said.

Teen apparel seller Pac-ific Sunwear of California closed its underperforming d.e.m.o stores last year and larger rival Abercrombie & Fitch Co is in the process of winding down its money-losing Ruehl chain.

Guthrie said Ruehl "didn't work" because the price point was too high, the product was not sufficiently unique and the market was saturated with similar merchandise.

Abercrombie, which runs its namesake stores and the Hollister and Gilly Hicks chains, saw sales at Ruehl stores open at least a year fall 34 per cent in the first quarter.

Last week, women's apparel retailer Talbots Inc said it completed the sale of its J.Jill brand as part of its efforts to focus solely on executing the turnaround of its core business.

"Retailers are finally realising that they have to get their own personality back ... they can no longer look like everybody else," Marshal Cohen, chief industry analyst with market research firm NPD Group, said.

"Rather than trying to appeal to everybody at all different price points, they are beginning to recognise 'you know what, we have to go back to who our core customer is and deliver on the promise,'" Cohen said.

Most recently, Finish Line Inc - which posted a quarterly loss due to the dismal performance of its Man Alive chain - said it would exit the streetwear-inspired segment to focus on its namesake line.

"Every brand now is going to have to earn its stripes. If it doesn't, it's going to go away," NPD's Cohen, who is also the author of Why Customers Do What They Do, said.

In addition to cutting costs and renewing focus on core profitable businesses, retailers are also trying to address the recession-weary consumer's tendency to choose popular brands over experimental or less-known products, Cohen said.

"Brands that apply to the masses will outperform those that are specialised," Keith Springer, president of Sacramento, California-based Capital Financial Advisory Services, said in an e-mail.

"The new generation of Americans is not like the baby boomers."

So will we see more brands biting the dust this year?

"I see a lot of the peripheral products that a lot of the companies have got into on their last legs!" Cohen said.

Cohen - who refused to name the brands that might fade away, citing confidentiality agreements - said: "So what we are seeing is probably only half of the rest of the brands that are going to go away."

Wall Street Strategies' Brian Sozzi raised concerns about the future of women's apparel retailer Bebe Stores Inc's bebe sport line - which has been underperforming for the past two years.