Is TJ Maxx Poised to Scoop Loehmann's Slice of Designer Pie?

Fashion is not for the faint of heart. Note Heidi Klum's plaintive refrain to the contestants on Project Runway, "One day you're in, the next day, you're OUT." Likewise, fashion retail is a fiercely competitive business. Even for those companies who manage to weather economic downturns, fickle shoppers, and transient trends like Loehmann's.

But now, can the venerable discounter of designer duds take another hit below its (ahem) studded belt from a formidable competitor like T.J. Maxx (TJX)? Especially now that TJX is aggressively moving into the upscale market?

I'm thinking no. But it's not for lack of tenacity.

Founded in 1921, Loehmann's came through the Great Depression to steadily build a business for thrifty-but-chic city gals during a time of unprecedented wealth (read: the 1950s and 1960s). But things got rough for the Bronx-based retailer -- who took a walk on the Chapter 11 side of the street in the late 1990s. Loehmann's emerged on September 6, 2001, just days before New York City (home to one of their flagship stores) was rocked to the core by the 9/11 terrorist attacks.

Still the company soldiered on, despite the encroachment of Century 21 Department Stores all over the New York area, with the help of Istithmar, a Dubai investment fund that bought Loehmann's in 2006.

It also held firm because, once upon a time, a fashion-conscious girl who was long on taste but short on dollars could step into Loehmann's "Back Room" and come out looking like a million bucks. Never mind the communal changing room or the necessity of fending off a competitive shopper (You have the only size 6 -- but I saw it first!). Outfitted in designer threads at a deep discount, these lovelies were totally loyal to the chain who served up a consistently great mix of goods for all occasions.

But high style at low prices became more ubiquitous, especially online at such outlets as Overstock.com or BlueFly.com, so it wasn't much of a surprise when the retailer seemed to be less cutting edge and more playing catch up with the newer, more nimble, style peddlers.

Side Note: None of Loehmann's brick and mortar competitors offer a great shopping "experience." Sorry TJX, Century 21, et. al., your harsh lighting, tiny fitting rooms (often with marginal-quality mirrors and few hooks), and sometimes surly staff make the exercise just that -- an exercise -- complete with grunts and grimaces (and I'm not just talking about squeezing into the clothes). But if you want bargain basement prices on a Theory suit or Donna Karan dress, well, you just have to hide behind your D&G sunglasses and learn to dominate those racks.

In the last year, TJX has taken a cue from its shoppers and has gone boldly and deeply into designer territory, buying upscale brands' unsold merchandise and discounting it to the delight of a new brood of customers. And it's not just for apparel. TJX is trotting out high end health and beauty aids too. A recent trip to my local store revealed Frederick Fekkai hair products and Clarins face cream.

The key to TJX's success (and Loehmann's potential failure) will lie in its ability to provide the goods on a consistent basis. That is what won Loehmann's customer loyalty well before frequent buyer perks were part of the sales program. TJX also needs to watch those price points. Even newer converts to its marketplace may balk at higher prices necessary to make a profit on luxury items.

So far TJX is looking good. Sales at stores open at least a year rose 14 percent in December, according to Thomson Reuters I/B/E/S. Loehmann's meanwhile, got a transfusion in the form of a $35 million asset-based credit facility from GE Capital in 2009.