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Five chief executive officers shared their outlooks on 2009 and business goals for the year, including controlling inventory, maintaining liquidity and not panicking.
This story first appeared in the December 31, 2008 issue of WWD. Subscribe Today.
JILL GRANOFF, KENNETH COLE PRODUCTIONS INC.
2009 outlook: “When we think about 2009, it’s certainly a time of uncertainty, but at the same time, it’s a time of opportunity. It’s less about pushing top-line sales and more about laying the foundation for future growth, so we will be well prepared when the economy rebounds.”
1. Focus on brand-building initiatives: “We have to focus on what makes our brand great, which is compelling product and marketing. This is an opportunity for our voice to be heard, since we think we will resonate well in this environment given our price and strong heritage. We’re also working on the customer experience of our vertical retail model, since we have traditionally really been a wholesale-driven company.”
2. Eliminate non-value-added activities: “We’re simplifying and optimizing our portfolio of brands. You’ll see increased initiative on Kenneth Cole New York and Kenneth Cole Reaction, while some of the smaller brands and labels may go away. Le Tigre is doing well, but for our small footwear labels, such as Tribeca, there is a possibility of converting them into Reaction. It’s about redeploying our resources, but nothing like the magnitude of Liz [Claiborne Inc., where Granoff served as executive vice president of direct brands when the company put 16 of its brands under strategic review]. We’re also rationalizing our real estate portfolio. We’ll probably close a couple of stores, but for the most part we will right-size our stores — in most cases making them smaller. We are doing very well on the outlet side, as customers search for value, and we see an opportunity with the Internet, where we had significant double-digit growth in 2008, which we think we can maintain or accelerate as customers seek convenience.”
3. Accelerate proven winners: “From a distribution perspective and a product perspective, our women’s apparel business is doing well, because it’s well-priced designer fashion. Consumers are trading down, and we will benefit from softness in the luxury sector. We have a very strong customer affinity, and this is really our opportunity to be strategic and redeploy our resources. Our Gentle Soul footwear line is doing well — they’re comfortable shoes that are actually priced higher than our other shoes. We see growth in accessories, because people are not necessarily redoing whole wardrobes, but they still want something new. Geographically, we’ll look to grow in top markets. For example, we’re gaining traction in the U.K.”
4. Tightly manage inventory and expenses: “While we absolutely have to lay a foundation for growth, we will continue to watch costs, curtailing discretionary spending and renegotiating a lot of our contracts. We are pushing for faster turns and will plan inventory based on faster turns. We’ll also plan more focused assortments, eliminating bottom performers.”
5. Maintain liquidity: “We have a very strong balance sheet, which is what enables me to sleep at night. We will be able to weather this storm and emerge stronger because we have $50 million in cash, no debt, access to credit facilities, and we don’t have a capital-intensive business model. There is a temptation to buy back stock at these low prices, but we look at this as a time to preserve cash, as we are anticipating bankruptcies and store closures from retailers.”
WES CARD, JONES APPAREL GROUP INC.
2009 outlook: “No one can say for sure how the year is going to roll out — 2009 is very unpredictable at this point. I’m very hopeful that the new [Obama] administration will be able to hit the ground running and continue to stimulate the economy. We’re waiting to get to the bottom of the housing market and find out where unemployment will stabilize.”
Card’s resolutions: “If I had to pick one resolution, it would be to really concentrate on our people. People are our biggest asset. It’s critical in times like these to overcommunicate. We hold town hall meetings every month, and I went to every Christmas party we had as a company. I have spoken directly to almost every wholesale employee. If the actions you take are deemed to be fair and proper and you have credibility, people will accept them because they understand the situation the economy is in. Our people, like all Americans, are feeling stressed with the general situation, but morale is very good, all things considered.
“What we are doing is what most companies are doing: managing our balance sheet for cash and reducing capital expenditures. We spent very heavily on tech for the past three years, so it’s very natural for us to take a pause, and it will be the main area of cuts. We’re also slowing on new store openings. We’re only opening the best locations and anything marginal we’ll hold back on.”
MICHAEL KRAMER, KELLWOOD CO.
2009 outlook: “I now think the turnaround will be closer to 2010 — 2009 will be a tough year. It’s dire out there, but we’re confident in our strategy and our financial position with our partner, Sun Capital.”
Kramer’s resolutions: “First, focus on executing our strategy, and secondarily, don’t panic. Also, the key to leadership in 2009 is keeping people motivated. That hopefully won’t be too hard for us because we’ll be experiencing a lot of operational wins in 2009.”
CHRISTA MICHALAROS, RAFAELLA GROUP
2009 outlook: “We at Rafaella expect 2009 to be a year of significant change,” and the Cerberus-owned company will be looking for acquisitions. “It will be the year that forces the industry to innovate and transform themselves in order to survive, a year where those who stay focused and develop innovative ways to excite the consumer will be the clear winners. Today, people’s priorities have changed significantly. Their confidence is shaken. We believe key themes for the year will be value, innovation and the season’s must-haves versus the excess of the past.”
1. “Operate like a lean, mean fighting machine and trim the excess everywhere.”
2. “Supertight inventory management. We love Alan Questrom’s quote from the WWD CEO conference: ‘No one ever went out of business because they didn’t have enough inventory, however, they did if they had too much.’”
3. “Liquidity, liquidity, liquidity.”
4. “Staying focused and confident in our mission of providing extraordinary value and innovation in every product category we provide. We must give her a reason to buy.”
MARK MENDELSON, ELLEN TRACY
2009 outlook: “The first half of the year will be challenging, and I’m hoping it will open up for summer and into fall. We’re really excited about fall, when our full product relaunches. We have a lot of great initiatives for fall.”
Mendelson’s resolutions: “For me, it’s about balancing all of it. It’s not like you can control your expenses and inventories, and not have great product. You have to be serious, but you don’t want to be miserable. You need to be careful, but you can’t expense yourself into profitability. When everything comes out of this, we want people to say that we didn’t sacrifice product to save money. It’s all about the product.”