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Charlotte’s Web Unravels

Angst in the teen fashion segment reached new levels this week. On the heels of dismal first quarter sales reports from bebe and The Wet Seal, Charlotte Russe Holdings Inc. announced it expects comparable store sales to drop 11-12 percent for the second quarter.

The San Diego-based chain, which includes 247 Charlotte Russe and Rampage stores, also says it is terminating its recently introduced Charlotte’s Room concept. The retailer launched tween accessories-focused concept Charlotte’s Room in fourth quarter 2000. But the 10 test stores, located in malls throughout California, have been unable to meet the sales volume necessary for profitable growth, and will close as quickly as possible, management says.

The company provided no comments on future quarters, except to say it expects third quarter 2003 to be profitable. "What we found interesting in management’s comments was that despite the recent trends, spring assortments for the most part are running full price," says Banc of America analyst Amy Noblin in a report on the announcement. "Therefore, the company is still sitting on inventory that is not moving and could further impact comps and margins into the third quarter. As a result, we are lowering our second half expectations dramatically."

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