Tween Brands to rebrand Limited Too stores
The move will give the Justice chain about 900 stores - nearly triple its current size - when the conversion is completed in the first quarter.
After the change, the New Albany, Ohio-based teen clothing chain will no longer operate its Limited Too stores in the U.S., ending the brand's two-decade history as a shopping mall stalwart. In addition to the stores being converted, the company will also close about two dozen Limited Too stores.
Still, some of the Limited Too's clothing will continue to be sold in Justice stores, where most apparel is about 25 percent less than its sister chain.
"Limited Too was the brand that introduced great fashion to tween girls, but our customers are looking for the next great thing and their parents want more value for their dollar," Tween Brands (nyse: TWB - news - people ) chairman and chief executive Mike Rayden said in a statement.
The desire for cheaper apparel was dragging down the company's performance, as comparable sales - an important retail industry metric - fell 11 percent at the Limited Too during the second quarter. Same-store sales rose 3 percent at Justice.
The company said the deal will save up to $25 million after taxes.
It will record an $18 million charge in the second half related to severance, store closings and other charges related to the transition.
Meanwhile Tuesday, the clothing chain said its poor springtime inventory choices and a sluggish economy kept shoppers away from its Limited Too stores, dragging down the company's profit.
For the quarter ending Aug. 2, the children's clothing merchant lost $6.7 million, or 27 cents per share. That compares with a profit of $2.1 million, or 7 cents a share, during the same period last year.
Revenue rose 4 percent, climbing to $223.1 million.
Tween Brands shares fell $2.52, or 16.9 percent, to $12.36 in after-hours trading. The company's stock fell 23 cents, or 1.5 percent, to $14.88 in regular trading.