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There’s a paradox that exists in the fashion industry that the bigger you are, the perception is the slower you are. But from Peter Boneparth’s vantage at the helm of the $4.5 billion Jones Apparel Group, “if you do this right, then the bigger you are, the faster you become.”
In less than a year as president and chief executive officer of Jones, having succeeded the legendary Sidney Kimmel, the most striking change Boneparth has initiated at the company and its 28 brands has been to empower its divisional leaders to independently develop their brands. But Boneparth has not taken his eye off the ball. Rather, it’s his philosophy of attention to detail, using accountability and responsibility, that he strives to inculcate throughout the ranks of Jones’ 16,000 employees.
“Speed is going to matter long term,” Boneparth said during a keynote address. “The people who are fastest are going to win. If we keep decision making at the top, we would never be able to get anything done.”
Boneparth’s path to becoming a leader of one of the largest American apparel companies could well be described as taking the road less traveled, but his background plays an important part in his approach to running Jones. Growing up, he closely studied his father’s experience in the retail furniture business, learning valuable lessons before becoming an investment banker, as head of investment banking for Mabon Securities Corp. and then executive vice president and senior managing director in the investment banking department at Rodman & Renshaw, specializing in advising apparel companies.
In 1997, he joined Norton McNaughton, a women’s moderate-priced career specialist that had gone public in 1994 but that needed a clear strategy to survive long term. “I wanted to see if I could do something and really turn around a business,” Boneparth said. “By invoking discipline and moving sourcing offshore, that all worked because the one thing Norton McNaughton had at the end of the day was significant brand equity. They had maintained a real-estate position in the store, so they really had given us a placeholder as we went about and fixed our business.” Following Norton’s acquisition by Jones, he became president and ceo of Jones’ moderate division and in March, he was named president of Jones Apparel Group, assuming the additional responsibility of ceo in May.
“Our core values are predicated by how we grew up and what we were surrounded by,” Boneparth said. “One of the things I learned very early on from my father was don’t be afraid to fail. He took an enormous amount of risk at a very early stage of his life that in the near term paid off for him quite well. He was one of the pioneers of helping to change the blue laws in New York State. He actually went out and opened up his store and found people liked to shop on a Sunday. He also for a very long time got arrested every Sunday for doing that. I learned something from that, which is, if you believe in something, go for it.”
Subsequently, Boneparth learned a more painful lesson watching his father’s business succumb to the difficult recession of the 1980s, stung by the high costs of maintaining inventory in the furniture industry. “I watched and I learned about inventory control. For him it was about the top line, and from that I’ve learned it’s always about the bottom line. By no means do I consider him a failure, but some of the mistakes and forces he got caught up in are still very relevant to how I think about business today.”
Boneparth also learned by watching the generational shift of apparel manufacturing families in the 1980s, when those families had generated large amounts of wealth and capital during the postwar rise of the industry in New York. As stores consolidated, vendors were faced with a choice of whether to close shop or join forces with a larger company, as they faced increasing investments in infrastructure, technology and sourcing. From his perspective, creating barriers to entry, or competitive advantages, is the most important means of building an apparel company that will succeed when facing the dominant barrier of department store business —?the matrix system, which he described as “the single biggest barrier to entry for smaller companies in the apparel industry…. If you’re on it, it’s very hard to get removed if your performance is anywhere near competent at this particular point, which is indicative of some of the issues facing department stores today, such as sameness and all the things we’ve heard something about.”
To create its own barriers to entry, an apparel manufacturer must build distinct advantages in its people, technology, brands, capital and culture.
“I do believe in this industry that big is beautiful and that big is going to be necessary to survive longer term,” he said. “That is, big, not by itself, but big in a diversified and balanced manner.”
From his standpoint, Jones is well positioned in all of those areas, with a vibrant workforce, the capital to move quickly on acquisitions and an aggressive mentality toward developing technology and sourcing capabilities. Brands, too, are a core barrier to entry, and this is an area which Boneparth identified for Jones to further develop.
“Historically, Jones has underinvested in the process of understanding the consumer,” he said. “Over the last nine months and going forward we will be investing a lot more energy in understanding her shopping patterns in each of our 28 different businesses — why she likes us and what she thinks is different about that brand. One of the things we are very careful about, which is a function of our size, is making sure we are not cannibalizing our own customer. I think historically, we have fallen prey to a little bit of that, especially in our better division.”
Boneparth also places a premium on technology, considering Jones ships more than 220 million units of merchandise and understands that those companies that can partner with stores with back-end and front-end technology all along the supply chain will be in the best position to survive long term. By maintaining a position that it will not own its own manufacturing assets, Jones is able to remain competitive with low capital expenditure in comparison to its sales, and invest instead in systems and people, as well as by closely monitoring the risks and rewards of sourcing through developing nations such as China.
“We are at the point where we’re big enough to make significantly sized bets in countries to get the kind of balance and payback we want,” he said. “It’s incredibly important to do that ourselves.”
While all of these factors have helped Jones build one of the most solid financial bases of all apparel companies, Boneparth still considers every company to be at risk. “This can also go away very quickly,” he said. “The apparel industry is littered with this, where you have had very big success, followed by very big failures. We walk in every day and have enough paranoia about this industry to understand if we don’t move forward and constantly evolve, we will be left standing still. We are not arrogant in that regard. Arrogance, more than anything, kills a corporation and its culture.”
Citing Jones’ duty to its shareholders and to Wall Street, which expects an annual growth of “that magic number,” 10 percent, Boneparth said a selective layer of acquisitions has become a practical component of complementing the single-digit growth expected at its core brands. That has resulted in a disciplined approach to identifying viable candidates. Among the factors he cited for a logical acquisition are finding companies that are growing faster than Jones’ core base, and ones that somehow diversify its customer base, distribution channels and product mix. Dedicated and intelligent management are also key, particularly in the sense that they should have a knowledge of sourcing and be able to leverage the resources of Jones Apparel Group to the advantage of making those brands better.
Asked in what areas he believes Jones is underrepresented, Boneparth cited the possibilities of men’s wear and children’s wear, but cautioned that those markets can be difficult in terms of the investment it would take to develop them. Further, he said that targets should be in the range of $200 million to $500 million in sales, considering anything smaller would also require significant development costs that could impact the rate of return on such acquisitions.
But he cited several opportunities for Jones, such as the expansion of its brands across different categories and in its own retail development, such as within the Nine West division and its 700 doors, as department store distribution continues to become a smaller percentage of Jones’ overall distribution. Certain of its moderate-price brands could also be expanded in cross-channel distribution to chain stores such as J.C. Penney, Sears and Kohl’s. While there have historically been issues of conflict and distribution between chain and department store distribution, cross-channel sales have become inevitable for some labels, although Boneparth stressed that would not be a consideration for its better-priced staples.
“It’s not a perfect world, some of the most important profit contributors and sales drivers happen to be brands that coexist across different channels,” he said. “We work hard to figure out ways to give department stores different products, but if a brand equity is high enough and the price value is high enough, then ultimately, they can coexist.”
However, Boneparth stopped short of criticizing the recent move by Levi’s to create a signature label for broad distribution at Wal-Mart. Rather, he considers it a “huge positive.” For Jones, that is, since it could create a large opportunity for its rapidly expanding denim business through Gloria Vanderbilt, LEI and Polo Jeans. “We are a major producer of denim and we think there arguably could become a vacuum,” he said. “Kohl’s, Penney’s and Sears are going to have issues with this…. History has shown that it is very challenging to maintain a very large business in Wal-Mart with any kind of brand equity and have it not affect your midtier and upper-tier business.”