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David F. Dyer, president and chief executive officer of Chico’s FAS Inc., knows a thing or two about turnarounds. He can orchestrate them, and knows what brings so many retailers and brands to the point of requiring them.
“The problems of Chico’s were very much the same with several of the other apparel companies I had worked with,” he said. “First, they lost focus on the customer. Second, they let expenses get ahead of the business. Those are the two common denominators I have seen at almost every place I’ve been.”
Dyer, whose long career took him to the former Burdines and Bamberger’s department store chains as well as Lands’ End, Home Shopping Network, Tommy Hilfiger and J. Crew, spoke during a discussion with Harold D. Reiter, chairman and ceo of Herbert Mines Associates.
Dyer was already a member of the Chico’s board when he became the company’s ceo in 2009. The company was losing money to the tune of $40 million and the stock price sank to $4. “We had a management team that actually didn’t like the customer,” Dyer said, noting that Chico’s had been serving women ages 35 and older and at the time had a hard time accepting that. By altering the offering, Chico’s “tried to make her a little younger and cooler, like everybody tries to do, I think,” Dyer said. “I would say, love the one you are with. We had one of the best customer segments in the industry that we really just walked away from.”
Chico’s had another problem — runaway expenses. “Expenses were up about 16 percent, and business was only up just 4 percent,” he said. “That only works in government. It doesn’t work in business.”
Dyer, brought in to revive the business, led Chico’s through management changes. “The biggest challenge to recruiting people is you have to sell the vision,” he said. “The company had 40 quarters of double-digit earnings growth. It was one of the great success stories for many years and it stumbled. We needed the people that could get it back in touch with the customer and get it moving again. I believed that people need to have a passion for the company they come into — a desire to make changes and do things well.
“When it comes to compensation, I don’t believe in big base pays. I believe in lots of incentives and building wealth over time through performance. With anybody who comes in, I want to make sure they are coming in with fire to get things done. I love people that are passionate about the business. People who can drive a business.”
Along with a new team came some serious fashion tweaking and redirecting the merchandising and marketing back to the core customer. “I can’t tell you how often people walk away from the customer they have,” Dyer said. “In some cases you do have to reinvent. But the most important lesson is, it’s always the customer first. You’ve got to listen to your customer. She is right 99 percent of the time. Let her lead you, and if you just take care of her to the best of your ability, I think you will do well.”
Dyer added: “We have a very different culture at Chico’s, it’s one that puts customers first. We are a service model; we are not transactional. Most of the selling goes on in the fitting room, not at the register.”
Under Dyer’s leadership, Chico’s has turned profitable and past the turnaround stage. The stock has recovered to between $18 and $19 a share. There has been a run of 11 quarters of positive comps and earnings growth, Dyer said. “We are feeling pretty good about where we are.”
Chico’s operates 601 Chico’s boutiques and 83 outlets, 364 White House|Black Market boutiques and 27 outlets, and 164 Soma Intimates boutiques and 17 outlets. Each brand also has a Web site and catalogues. The company also operates the Boston Proper direct-to-consumer business, which will open its first store in March. Chico’s was founded in 1983 as a small boutique selling Mexican folk art and cotton sweaters on Sanibel Island in Florida. FAS, a carryover from the company’s roots, stands for ‘folk art specialist.”
Store expansion is back in the game plan, with plenty of opportunity seen domestically. There is also an eye towards international expansion, but Dyer said that with all the room for domestic growth, there’s no urgency to go abroad. “We’ve got about 1,000 stores still to grow in the U.S. We will be looking at international, but we are not forced to do that. We will also down the road look at acquisitions,” he said.