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At Piper Jaffray Conference, Retail Execs Take on the Economy

Speakers at Piper Jaffray retail conference discuss strategies like Internet marketing, expanding into new markets and streamlining inventory.

Same-store sales may continue to tumble, but that’s not preventing specialty retailers from continuing to explore opportunities to identify and build new markets during the downturn.

Speakers came to this week’s Piper Jaffray retail conference in New York loaded with stories about what they’re doing to cut costs and inventories, but several also shared their ideas on how best to take advantage of the Internet and secondary markets and fine-tune merchandising and marketing strategies, including private label, to cope with the transformed retail landscape.

American Apparel Inc., which has only recently seen a slump in same-store sales, views old-fashioned brick-and-mortar expansion, with a geographic twist, as key.

“We believe there’s an opportunity to reach beyond young, metropolitan adults,” said Adrian Kowalewski, chief financial officer of the Los Angeles-based retailer and wholesaler of trendy basics, noting that there are many “underpenetrated urban markets” in the U.S. and Canada and abroad.

As the company has slowed the pace of its expansion — it opened 78 stores in 2008 and plans 25 to 30 new stores this year — there is also a renewed focus on “execution,” which includes cost control and inventory streamlining.

“One of the reasons we are holding onto the wholesale business is because it allows us to keep costs down while building our retail business,” he said, adding another advantage of its in-house production is faster inventory turns.

Still, as the company continues to grow abroad even as it manufactures locally, shipping expenses may prove costly in the long run. The company has explored overseas production to save money, but Kowalewski said part of the firm’s DNA is “made in America.” Changing that model could “erode the brand,” he said.

J. Crew Group chairman and chief executive officer Millard “Mickey” Drexler struck a blow for exclusivity, both online and off.

“We are not open to others cutting prices,” Drexler said. “If you own anything others own, you are vulnerable of the competition selling it at a lower price.”

At the firm’s annual meeting earlier this month, Drexler said that, while “a work in progress,” the company plans to launch e-commerce for its Madewell unit in the first quarter of next year.

“We are not in a hurry, but we want to keep growing, obviously,” he said. “I think the world is going where it’s going. We’re not going to fight it.”

While Gap Inc., Pacific Sunwear of California Inc., The Talbots Inc. and Abercrombie & Fitch Co. have either abandoned secondary nameplates or, in the case of the latter, are considering doing so, The Wet Seal Inc. has started to see signs of improvement at its long-suffering Arden B. division.

“Arden B. really required major surgery, major reconstruction,” said Ed Thomas, president and ceo of Wet Seal, noting Arden B. not only modeled the quicker merchandising turns after its sister brand, Wet Seal, but also lowered prices and improved the fashion mix to target “everyday wear.”

The new strategy improved Arden B.’s comparable-store sales practically overnight. Last month, Arden posted an 11 percent comp jump, as the Wet Seal division’s comps fell 12.4 percent. Arden’s April comp increased 6 percent, while Wet Seal’s comp declined 4 percent.

Wet Seal executive vice president and cfo Steven Benrubi said, “It is critical to our fast-fashion business to stay lean and to turn inventory as quickly as possible,” especially as it’s up against competitors such as Hennes & Mauritz and Forever 21.

Thomas pointed out that the trading down that has taken place since the economic downturn had the “biggest impact on the young contemporary market,” as fast-fashion firms have been jockeying for lower price points to grab market share.

But the competition is fierce in every sector, as stores try to reel in consumers on price. According to Rob Campbell, vice president of investor relations and treasurer of Nordstrom Inc., the upscale retailer’s “focus remains on providing a compelling merchandise offering to meet the evolving needs of the customer.” That’s included more private label in the women’s business.

Like Nordstrom’s Campbell, Jim Kenney, senior vice president of corporate strategy and investor relations at J.C. Penney Co. Inc., has seen “signs of stabilization” in the business. The company’s American Living label, from Polo Ralph Lauren Corp., is enjoying double-digit year-to-date increases despite the economy.

“We are articulating our value proposition, not reinventing who we are,” he said. “We don’t want to be the slowest turtle, but the fact is if you are the fastest turtle — you’re still a turtle.”