| BUSINESSWEEK ONLINE : MAY 29, 2000 ISSUE | ||||||||
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| COVER STORY
Children's Place: Hey, Good-Looking
That's just the sort of harried-mom mentality that's making a success story out of the Children's Place (PLCE), a chain of 335 stores nationwide that has found a foothold in a category dominated by some of retailing's biggest names. Indeed, observers say the Children's Place, No. 49 on our Hot Growth list, is a concept that stands out among the ranks of Gap, Gymboree, and J.C. Penney. ''They have a real and unique niche,'' says Carole Cranmer, retail analyst for Josephthal & Co. The company's formula of providing classically styled children's clothing at prices as much as 30% lower than rival GapKids gives it a double-barreled edge over its competition. The upscale look of the stores and the clothing gives the chain entree into some of the nation's most distinctive malls, such as Lenox Square in Atlanta. But its lower prices let the stores function equally well in value-conscious retail strips, such as the Fulton Mall in Brooklyn, N.Y. ''We have a broad acceptance,'' says CEO Ezra Dabah. ''We do well where our competitors cannot.'' GROWING PAINS? That popularity shows up in the numbers. Over the last three years, average annual sales have shot up by 44%, to $422 million, while earnings have climbed 16%, to $35 million. Even better, sales at stores open at least one year jumped 5.5% in the first quarter. The Children's Place did not start out life as Dabah's baby. It was founded in 1969 by two Harvard business school MBAs as their senior thesis project. The company wound up in the portfolio of Canadian developer Robert Campeau, whose retail empire collapsed in the '80s. Dabah and his family purchased the chain out of bankruptcy protection in 1989. Dabah has had his share of retail woes. He was an executive in another family investment, Gitano Group Inc., a high-flying clothing maker that sank into bankruptcy in the mid-1990s. Dabah oversaw Gitano's product design and manufacturing and in the early '80s founded the company's children's division. Even today, investors remain a bit unsure that the Children's Place has gotten through its growing pains. The chain went public in 1997, and promptly missed its first quarter of earnings, sending shares sprawling. Since then, the stock has swung all over the board, recently trading at 19, up 14% so far this year. Laurence C. Leeds Jr., chairman of Buckingham Capital Management Inc., which owns more than 400,000 shares, believes the stock is poised for more gains this year. ''These are excellent retailers,'' he says. ''They have significant growth potential.'' Dabah is forging ahead this year with a key part of his growth strategy: store openings. Last year, the company added 54 stores, says Dabah. Plans call for 100 new stores in 2000, 120 more next year. Rival GapKids currently operates 640 stores in the U.S. Dabah is facing a lot of hurdles, including some entrenched competition, in his planned march to national prominence. But he hopes his own take on manufacturing will give his company an edge. To drive down costs, he sources each component of a garment--from the fabric to the embroidery to the assembly--in order to ensure the lowest price at each stage. ''You have to get the true, best price for a garment,'' he says. Any mom would agree. By ELLEN NEUBORNE _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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