The Specialty Store Winners by Gross Margin

From a profitability perspective, specialty apparel retailers had a challenging fourth quarter, and it looks like things might not improve anytime soon. In a perfect storm of heavy markdown activity, soft sales and the impact of a West Coast ports shutdown, an analysis by WWD of the gross margin rates of specialty retailers showed steep declines in the profit measure. Of the 18 companies tracked, 11 suffered deep erosion in gross margins while seven posted gains. Of the decliners, six of the 11 companies posted changes of more than 200 basis points. Of the gainers, three reported gains greater than 300 basis points. Analysts and investors can tolerate swings in gross margin rates that are 100 basis points either up or down. Changes greater than that are cause for scrutiny. The extreme declines and gains of the retailers analyzed in this report also reflect the nature of being a specialty retailer. This is a channel that is more sensitive to macroeconomic factors and other market changes as compared with larger department store and mass retailers who are often better at weathering market changes. Aéropostale Inc., Pacific Sunwear of California Inc. and Bebe Stores Inc. posted the greatest gains in gross margin rates as they

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