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Edward Lampert’s Expansion Strategy for Lands’ End

In an exclusive interview with WWD, the Sears chief outlined his plans to grow the brand.

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Last week, Edward S. Lampert, the chief executive officer of Sears Holdings Corp., said at the company’s annual meeting that Lands’ End had “a solid plan.” This week he elaborated.

This story first appeared in the May 23, 2013 issue of WWD.  Subscribe Today.

“Lands’ End has the permission and the ability to be a global brand. We want it be one of the world’s great global brands,” Lampert told WWD in an exclusive interview.

 

Developing synergies and integrations between Lands’ End and Sears to support each other’s growth has been a slow work in progress that was botched in the early years after Sears purchased Lands’ End in 2002. Lampert, the hedge-fund manager who took control of Kmart in 2003 when it was bankrupt and in 2005 merged it into Sears, last January became ceo of Sears Holdings Corp., thereby taking a greater role running the parent company. He told WWD that since 2005, he’s “pushed hard” for integrations between Lands’ End and Sears, though he keeps an arm’s length from actual management of that brand.

In the interview, Lampert had no shortage of words describing the challenges integrating Sears and Lands’ End, his philosophy on retailing and his priorities: getting fresh ideas to propel the business, picking up the pace on testing new concepts and generating higher productivity before expanding Lands’ End retail in earnest. He also said the strategy is “test smaller, test more and test faster” so the company learns what new concepts work or don’t work, and can execute better.

 

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On reports that he has a plan to catapult Lands’ End to a $5 billion business in the foreseeable future, from the current $3 billion volume, “Eddie,” as he is widely known, had nothing to say other than, “There is truth in the desire to globalize and grow the brand.”

He’s been criticized for being too restrained with capital expenditures at Sears stores, but Lampert, who seemed sensitive to the subject, cited a dearth of compelling ideas for innovation that would justify increased investment. The investment question, he said, is “not just relevant now. It’s been relevant since I have been involved since 2005.”

Lampert suggested examining to what degree past Lands’ End managers sought investment from Sears, and whether the creativity was there to support it. “We haven’t had enough good ideas to actually put money behind. I’m sort of generalizing,” meaning it’s an issue that is relevant to Sears Holdings overall, not just Lands’ End, where he brought in Edgar Huber as president and ceo in August 2011 to unlock the brand’s potential.

 

Lampert suggested recognizing the rollout over the last seven years of nearly 300 Lands’ End shops inside Sears, ranging from 5,000 to 10,000 square feet, with a handful as big as 20,000 square feet. That’s entailed spending for inventory, fixturing and computer systems, he pointed out, not to mention manpower. “Some people could argue that Lands’ End could have done fewer or more stores. The issue of doing more or doing less was not the primary point. The primary point is how great of an experience can we create,” said Lampert.

“By way of analogy, putting a Lands’ End store in Sears is like putting a hotel in TriBeCa. It can become the foundation to build around” — in other words, the magnet that attracts retailers, restaurants or residential development to the vicinity.

“With Lands’ End, we are really upping the store experience in apparel for Sears, creating the opportunity to build around it” with brands, private labels or other concepts. “We still have more opportunity” to elevate the presentation, Lampert said. “That’s what I am in the process of figuring out with the Sears management team.”

On the investment question, he also cited the development of Canvas, an offshoot of Lands’ End launched in late 2009. It’s a more fashion-oriented selection of casual clothing with younger fits and a younger attitude.

In addition, resources were recently poured into remodeling Lands’ End shops-in-shop and three freestanding Lands’ End stores to a prototype with new fixtures, mannequins, key item areas and an overall improved layout for easier shopping, logical adjacencies and a colorful, whimsical display.

“I believe the physical representation should be something that matches the online digital presentation,” Lampert said. “We have made a large investment to bring that to life. Integrated retail is still not second nature. It’s something that we are still refining.” Still, the Lands’ End experience and financial performance have gotten better, Lampert said.

Early efforts at channel integration at Lands’ End go back to 2006, when telephones, computers and catalogues were added to Lands’ End inside Sears so shoppers could buy products not available in the stores. Another step was enabling customers to return Lands’ End online orders to Sears stores.

 

Lampert admitted it’s surprising that Lands’ End was among the first American brands to go overseas 13 years ago and has so far only established physical operations for direct-to-consumer distribution in three countries — Germany, the U.K. and Japan, though it ships to 125 countries and has no overseas stores. Domestically, Lands’ End has also barely scratched the surface with freestanding stores, operating only 13 which are called “inlets.”

“The issue is not quantity but quality of experience,” Lampert said, adding that Lands’ End productivity inside Sears stores must be increased before Lands’ End raises its retail profile. “The top priority is to improve productivity in the space we have before expanding. We are better than we were but not good enough in terms of productivity.

“If you get the quality of the experience right, the options of going to the high streets, to use a British term, increase. Lands’ End isn’t per se a major city brand. It’s a much more universal brand. It’s not a chic, hip brand, but it’s a very popular brand.”

Lampert agreed that at a Lands’ End store on a high street, compared to a Lands’ End inside Sears, “Productivity would be much higher. But does that cover the higher lease expense? The collateral benefit, which I don’t dispute, would be it makes the brand more top of mind.

“Physical stores outside the U.S. is an opportunity, whether we do it alone or have partners,” Lampert added. “This is not a brand that has gone international and has failed. There are multiple ways for this brand to grow.”

When asked the question “When was the last time Lands’ End went into a new country?” he replies, “Why hasn’t Lands’ End entered a fourth country, when you have the European Union, the development of China? In terms of investment, some of it is leveraging what is already there, so you can distribute catalogues beyond the U.K., Germany, Japan. If you develop product for those countries, is it relevant to neighboring countries and cultures?”

At one time, Lampert had a view to sell Lands’ End. Maybe one day that happens, though the signs now point to Lampert deeply implanting Lands’ End into the Sears landscape. That would make a sell-off less desirable and more difficult.

“The opportunities for Sears Apparel and Lands’ End to work well together, those things have been there since the acquisition,” Lampert said. “Not enough was done. I am trying to better understand as ceo why certain things happen and certain things didn’t happen.”

Coincidentally, both Lampert and Lands’ End are 50 years old, encouraging him to reflect: “What I feel we inherited with the merger was a very solid buy but a very conservative culture. There wasn’t a great plan to integrate Lands’ End into Sears in any way. There was fear and respect at the same time that you don’t touch Lands’ End. That this is a jewel. There wasn’t a great plan to integrate Lands’ End into Sears in any way. There was debate whether that such be done at all.”

 

Sears buyers, he recalled, were basically selecting Lands’ End products, as if they were selecting from any other brand from the market, like Levi’s. The presentation fell short. “Lands’ End was mixed in with everything. It wasn’t distinguished,” from the rest of the assortment, Lampert said. “When you talk about a strong brand like Lands’ End and a strong bureaucratic culture like Sears, it was very easy not to get things done. They were two separate companies within Sears Holdings that needed to work together.”

Lampert, who is also the founder, chairman and ceo of ESL Investments, said now it’s about “Lands’ End-izing Sears, not Sears-izing Lands’ End.” Lands’ End service and customer satisfaction levels are very high, and that’s something he’s “intent” to build upon.

He said there’s been a “couple of pushes” on his part, to establish a meaningful Lands’ End presence within Sears, and to push Lands’ End to go global. “I have tried to be a catalyst. I have tried to be provocative,” he said.

He’s also advancing the Sears “Shop Your Way” loyalty program which gives members first cracks at discounts, new merchandise, as well as points based on purchases. Lands’ End has long had a significant school uniform and business outfitters  divisions that parents, schools and corporations sign up for. “That’s always been something like a membership type business but that hasn’t been there broadly for Lands’ End customers,” Lampert said. “We are trying to make that more explicit, that relationship.…A lot of Shop Your Way members don’t do [much] with Lands’ End but should. How do we get them to love the brand? At the same time, a lot of loyal Lands’ End customers could be drawn into shopping Sears,” for Kenmore and Craftsman, among other reputable brands. “How much better can we communicate with Land’s End customers through the Shop Your Way framework?

“I am pushing a lot more learning. If we mess it up we need to know right away. We want to know it first and take care of it. The issue is can you test smaller to go faster, to learn faster. If you get that learning model, how fast can you execute behind that? What I have seen at Lands’ End and at other places, it’s sort of like a shower that’s either scalding or freezing cold. The dial needs to be refined.”

He said Lands’ End, in the past, if it went out on a limb with a new product or concept that didn’t work, and turned off customers, “Then it went back into its shell” and put innovation on the back burner.

“I like to think Lands’ End can be more fashion forward without displacing customers. There are more people and more companies that get it wrong than get it right. It’s not something I have seen in apparel done well. It’s very easy to take big, bad risks. Coach is a very good illustration of something relatively stodgy becoming a lot more aspirational.”

He gave his definition of a great company: “A great company grows without sacrificing quality.”

Although Lampert never met Gary Comer, the late founder of Lands’ End, “He was somebody I have great respect for,” particularly for advocating strong customer service and product. But there’s a flip side — a culture that feared mistakes and rarely took chances. “In some ways, the company has been overly conservative. I would like Lands’ End to be appropriately conservative, and smart aggressively.

“Probably a lot of people would say, [I’m] really conservative, and there are other people who say, ‘Why is he pushing on this? Why is taking this risk?’ I have always been a risk taker. But I’ve been a Warren Buffet-type risk taker. That’s about doing your homework and not growth for growth’s sake.”

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