Metropark Aims to Buck Sector

By Lynn Cowan

Clothing chain Metropark USA Inc. filed last month to go public, weeks before many of its brethren, from department store Nordstrom Inc. to Gap Inc., were preparing to report slumping same-store sales.

But with the highest same-store sales-growth figures of any retailer in the U.S. and a marketing concept that relies on cocktail-fueled in-store "VIP" events hosted by DJs, this chain might have the chops to pull off a public offering, even as its sector is pummeled by the economy.

Based in City of Industry, Calif., Metropark tries to set itself aside from other mall clothing chains by appealing to fashion-conscious 20-to-35-year-olds. Its stores host club-like gatherings for customers, complete with alcohol and DJs, while music videos play on flat screen TVs. The marketing is more than skin deep, and the brands Metropark carries aren't typical mall fare: They include such labels as English Laundry, Rock & Republic and True Religion.

The company registered with the Securities and Exchange Commission on June 13th to raise $100 million on Nasdaq through a listing under the symbol MTPK. Because Metropark has set neither its share price or size, the actual amount it raises through an IPO likely will be different from the registration amount.

The company has opened 43 stores in 17 states since it began operating in January 2004, with only a single outlet located outside a mall. Its comparable same-store sales grew 34% in the fiscal year ended Feb.2, up from 18% in the prior fiscal year. The company plans to open a total of 25 new stores in this year, and 25 to 30 stores annually in the years after.

Those same-store sales figures are the best of any retailer in the nation, coming in ahead of video game seller GameStop Corp., handbag maker Coach Inc. and women's casual- apparel maker Guess Inc., according to the Standard & Poor's Richard J. Peterson, director of markets, credit and risk strategy. Although apparel chains' June results appeared slightly better than analysts expected, the month saw a 0.8%drop in same-store sales, according to the Thomson Reuters Same Store Sale Index. Much of the decline was due to a 7% slide at Gap Inc., the segment's biggest firm.

"In terms of high-end retail," said Mr. Peterson, "the best parallel for MetroPark would be Coach," which is busy redesigning its line and planning to open 200 new stores in the U.S. over the next several years.

In the latest year, Metropark's net sales doubled to $71.6 million and it had net income of 154,000, compared with a net loss of $3.2 million in the prior year. But the company doesn't pretend to be immune to what ails many other apparel retailers, warning in its prospectus that a prolonged economic downturn could negatively affect its business.

Like any retailer catering to fashionistas, Metropark risks losing its edge in anticipating trends, and many run higher expenses than other retailers for in-store employees, whom it calls "style consultants." The company also has no lock on the brands that it carries and competes with large retailers and small boutiques that are better known, such as Barney's, Saks Inc., Neiman Marcus Group Inc. and Fred Segal.

Metropark also doesn't advertise in print or on billboards, television or radio, the way many of its competitors do, which could impede its brand recognition among consumers.

Yet the company's management team reads like a who's who of successful clothing retailing executives: founder and Chairman Orval Madden also founded Hot Topic Inc., a retailer for teens; Chief Executive Renee Bell hails from Bebe Stores Inc. and Charlotte Russe Holding; and Chief Financial Officer Efthimios P. Sotos has served as the chief of financial officer of BCBG Max Azria Group Inc and Jones Apparel Group Inc.

" They know what they're doing or they wouldn't get the results they are getting in this market," says Howard Davidowitz, chairman of Davidowitz & associates Inc., a national retail-consulting and investment-banking firm based in New York. "To perform in this environment, a company needs to be very, very good."