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Charlotte Russe's Shares Surge 7.9%

The apparel retailer's stock touches a 52-week high in trading after the company says it will sell 44 Rampage stores to rival Forever 21.

July 01, 2006|Leslie Earnest | Times Staff Writer

Shares of Charlotte Russe Holding Inc. tapped a 52-week high Friday, a day after the women's apparel retailer announced that it was selling most of the assets of its struggling Rampage chain to competitor Forever 21 Inc. for $14 million.

The move allows the San Diego-based retailer, which operates 360 Charlotte Russe stores and 64 Rampage sites, to focus on its namesake chain. The company plans to open an additional 90 Charlotte Russe stores by the end of fiscal 2007.

After the sale, Charlotte Russe will be left with 20 Rampage stores. It intends to turn four of them into Charlotte Russe stores and to dispose of the rest.

Analysts and investors liked the idea.

"If you look at the mall space, it's hard to come by prime locations," said Jeffrey Van Sinderen, an analyst with B. Riley in Los Angeles. "So this gives Forever 21 a way to acquire some prime locations, and it gives Charlotte Russe a way to exit these Rampage stores. I think it's a great deal for both parties."

Russe stock hit $24.08 in Friday trading before closing at $23.94, up $1.76, or 7.9%.

The rapidly growing Forever 21 said it planned to create more of its namesake stores from the leases it acquires from Russe. Some of the sites will be used to start a new concept, Senior Vice President Larry Meyer said.

He declined to divulge information about the new division, except to say that the stores will sell both men's and women's clothing. Although Forever 21 sells some men's apparel, it caters mostly to trend-hungry young females.

Meyer said the privately held retailer expected sales to pass the $1-billion mark this year. Last year, Forever 21 bought the assets of 150 Gadzooks stores out of bankruptcy. Some of those stores also are being converted to Forever 21 stores, Meyer said.

The Los Angeles-based retailer operates 366 stores under the banners Forever 21, Forever XXI, For Love 21 and Gadzooks.

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