If you haven't already been humbled by the economic downturn, just listen to Allen I. Questrom.
Retail’s turnaround king has an outlook that’s as sobering as any and a prescription for getting through the years ahead that calls for major alterations.
He’s not big on making predictions and hasn’t much faith in those who do: “One thing you should be clear on — all the experts, and all the prognosticators, have been totally inaccurate on what is actually happening. They tell you one thing and three months later something else happens.”
Nevertheless, his presentation at the WWD/DNR CEO Summit, in the form of a Q&A, stirred up the soothsayer in him. “We are going to go through some very tough times and if you think and hope it’s going to be get better in three months or six months, you’re in for disappointment,” stated Questrom.
As Questrom sees it, the nation is not confronting a typical recession. “This is a real transformation — a transformational shift that all retailers and all business people have to think about,” he said.
For the months and years ahead, here’s the Questrom spectrum of survival tactics: First, provide greater value — and not merely through sales; second, it’s better to be underinventoried than overinventoried, and third, leaders must “overcommunicate” to the team on corporate strategy and changes including layoffs and other drastic measures.
Questrom’s 40-plus years in retailing and his career trademark — rationalizing troubled chains — make his views particularly relevant. He’s seen up cycles and down cycles, lifted chains from the depths of bankruptcy or near bankruptcy, taken tough and aggressive actions impacting staffers and vendors, and tackled major mergers to build up businesses. As much as he’s taken the big picture point of view, with some megamergers and remaking companies with broad strokes, Questrom is known to be deep into the merchandise and disposed to challenging his buyers on the nitty-gritty of the individual stockkeeping unit, whether it’s the color, the silhouette or where it’s placed on the selling floor.
But he’s not all business. He’s well traveled, geographically, as well as through fashion, financial and retail circles. And when he’s not having a power breakfast at the Regency, he’s likely to be bicycling through the French countryside, skiing in Aspen, Colo., walking his dogs or checking out contemporary art. Currently, he is a senior adviser at Lee Equity Partners LLC and a member of the boards of Sotheby’s and Wal-Mart Stores Inc.
Questrom began his career in 1964 as a management trainee at Federated Department Stores, which is now called Macy’s. He worked at Abraham & Straus, went on to run Rich’s and Bullock’s in the Eighties and from 1988 to 1990 ran Neiman Marcus Inc., which at the time was surviving on thin margins. He boosted profitability significantly, but left abruptly in 1990 to join the then-bankrupt Federated Department Stores Inc., as chairman and ceo and pull it together with the help of his second-in-command, James Zimmerman. Subsequently, Questrom led the company’s dramatic $4 billion takeover of then-bankrupt Macy’s, creating the largest traditional department store chain in the country.
After leaving Federated in 1997, Questrom was chairman and ceo of Barneys New York just after it emerged from bankruptcy. While there, he instilled some financial disciplines and launched Barneys’ Co-op chain.
Barneys was small potatoes for Questrom, so it wasn’t surprising he cut his stint there short, leaving after about 18 months to tackle a tired and ailing J.C. Penney Co. Inc., which he cited as his toughest turnaround assignment.
When he joined Penney’s in 2000, it was a decentralized company where the store managers were king. Each store bought individually. There was no central distribution center and no information technology. It also had peripheral businesses, like an insurance firm and companies in South America that were more distractions than contributions.
“Penney’s had the most moving parts and really was almost 30 years behind the times,” Questrom said. “It was a company that had not dealt with where the world had gone.” It offered good value but had lost track of the competition and what was needed to compete. Questrom and his team centralized the business, built distribution centers, reorganized and cleaned up the presentation in the stores, installed new technology and elevated the stock price dramatically in the process — 147 percent in his first year on the job. He stayed at Penney’s until December 2004.
It was an ordeal for sure, bigger than other assignments, but not without similarities in his approach. “I look at a company and ask, ‘What’s its history? Does it have a reason for being, and most importantly, what is the makeup of the people. Who have been the leaders of that company?’ In all companies, the number-one issue is the people. Most companies, if they’ve maintained the same organization, probably have very good people. “Saying that, you need to understand the cash flow. Boards generally don’t realize they are in trouble until the company is almost ready to go bankrupt or is bankrupt. You must understand that when you walk into this company you may or may not win. You’ve got to understand you are going to have on your merit badge some losers along the way. But you have to be able to think at least that if there is not money, you have a way to get money.” Penney’s was very close to bankruptcy when he joined the chain but it sold off an insurance company. “If we didn’t have that to sell, we would have had a different story to tell.”
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