Avenue Struts Uphill

Comp store sales increased 11%, versus a decline of 2.2% in first quarter 2004. The chain's comp store sales at areas in the country's warmer climates rose between 15% and 22%, depending on their particular location within regions that were not impacted by cold spring weather. "This just may foretell future numbers at stores in colder regions in second quarter," Raphael Benaroya, chairman, president and CEO, speculated during a conference call.

In the opening quarter of this year there were a total of 512 Avenue units, compared with 535 in first quarter 2004. The store closings were the result of "fleet management," said Benaroya. He also said the company would add just one new unit in 2005.

Announcements of new store openings for 2006, he said, would come after this year's second-quarter report. "We will go back to more vigorous store openings," he said without disclosing a number of new units on the horizon. Asked where they might be located, he said, "we see still more opportunity in the Northeast and the South, and I don't think we've fully saturated California." For now, however, URGI will "stay the course."Growing competition in this apparel niche is rapidly expanding. In addition to specialty stores, "mass merchants have a significant presence in the large-size market," Benaroya said. "And more brands have also expanded to large-size merchandise." Despite increased competition, URGI's first-quarter net sales rose 9% to $106.5 million, up from $97.5 million in the same quarter of the previous year.

Among the most positive increases, however, was an increase of 23% in transactions per average store, according to George R. Remeta, vice chairman and chief administrative officer. He noted that this comes on top of an 18% increase in the fall season of 2004. "More customers are buying more when they shop in an Avenue store."

Benaroya attributed this to better target marketing and "an extensive transformation that includes more outfits versus separates and more emphasis on fashion and less on basics." The strongest categories in this year's first quarter were women's tops, denim, accessories and shoes.

The financial statement showed that URGI is sitting on $18 million in cash. When an analyst asked how the company would spend that money, Remeta said two areas of investment would be an upgrading of the point-of-sale technical platform in stores, to make units more productive, and store remodeling, including upgraded displays.

The internet will also absorb some of that investment. Internet sales increased 90% during the first quarter compared with the same quarter a year ago. "There's increased potential in the internet," he said, "and internet sales are quite profitable."

Making clear that Avenue will rely on a steady stroll rather than a rapid acceleration of its pace, Benaroya concluded, "The company's strategic repositioning is working. We will concentrate on detailed execution of the plan that's in place; execution is the key to sustaining the positive momentum."