Store Closures, Layoffs for Charming Shoppes

Feb 07, 2008 4:07 AM  By

A shareholder group for Charming Shoppes a few weeks ago asked for changes at the multichannel plus-size apparel retailer, and it got them—some of them, anyway. Charming Shoppes announced Tuesday that it has eliminated 200 full-time positions and will further pare back its capital budget for fiscal 2009.

The company, which in addition to its fashion store chains owns the Crosstown Traders catalogs, said it slashed 150 corporate and field management positions on Jan. 31. It cut another 50 jobs by relocating its Catherines Plus Sizes business from Memphis to its corporate headquarters in Bensalem, PA.

Charming Shoppes also reduced its capital budget by more than $40 million–a 30% decrease from fiscal year 2008–primarily through fewer planned store openings. It plans to close about 150 underperforming stores, including about 100 at the Fashion Bug chain and the four-store Petite Sophisticate full-line retail concept.

The company did not return phone calls by press time, so it was unclear if or how the catalog business would be affected by the budget cuts. The shareholder group on Jan. 15 sent a letter to the board of directors for Charming Shoppes outlining several concerns about the company and suggesting a possible sale of the catalog business.

Why are shareholders concerned? For the third quarter ended Nov. 3 the retailer reported a net loss of $3.6 million, compared to net income of $19.4 million for the same three-month period last year. Charming’s net income for the first nine months was $41.0 million, compared to of $84.0 million for the same period the previous year. Charming Shoppes’ fiscal year ended Feb. 2.

Stuart Rose, managing director with Wellesley, MA-based investment bank Tully & Holland, says comparative sales are down across the board for the company, and expense reductions are a better bet than turning around sales.

“While it may be difficult, closing stores, consolidating operations, and pulling back capital expenditures are sometimes necessary to right a business, increase profitability, and deal with issues,” Rose says.

It’s been a rough week for Charming Shoppes. The company was stunned by a fatal shooting at its Lane Bryant store in Tinley Park, IL. The store manager and four customers were killed in the Feb. 2 tragedy.

On Feb. 5—the same day it announced the layoffs and store closures, the company said that Diane Paccione, who was president of the retailer’s Petite Sophisticate Outlet, Lane Bryant Outlet, Catherines, and Fashion Bug stores, resigned to become CEO of rival Deb Shops. Charming’s chief operating officer Joseph Baron will replace her in the interim.