Jane Elfers drives the turnaround at Lord & Taylor.
This story first appeared in the November 14, 2007 issue of WWD. Subscribe Today.
She’s been the medicine woman reviving one of retailing’s last standing grande dames.
“It has always been very important to me personally that Lord & Taylor stays America’s oldest department store under my watch,” Jane Elfers, Lord & Taylor’s president and chief executive officer, said.
While NRDC Equity Partners has been injecting capital to remerchandise and remarket the 181-year-old chain and redevelop its real estate, Lord & Taylor owes its survival as much to Elfers, a determined, no-nonsense merchant.
She became the retailer’s ceo in May 2000 at age 39 and saw the potential for a revival long before NRDC bought the $1.4 billion chain in 2006 for $1.2 billion from Macy’s, which inherited the business through its May Department Stores acquisition two and a half years ago.
Elfers kept the chain going through years of corporate neglect at May and enough image and fashion issues to put any regional retailer out of business. It was so off the fashion map that many New Yorkers would need to think twice to recall the cross streets of Lord & Taylor’s Fifth Avenue flagship, while Macy’s and Bloomingdale’s flagship locations were always indelibly ingrained in consumers’ minds.
Then there was the ownership change, during which Elfers led the sale process to NRDC, and had to retain top management. Yet even before, she triggered a huge downsizing involving closing 32 stores over a few years and a massive remerchandising that is ongoing.
Now with the business stabilized, management intact, and some new talent on board in creative and operational areas, Elfers and NRDC are anxious to put the store back on the map, and in a place where shoppers know exactly where the business stands. “We’re ready for the next 181 years,” Elfers said.
Elfers’ Seven-step Action Plan
1. Right size the real estate portfolio.
2. Remix and upgrade the merchandise.
3. Simplify the store layout.
4. Rethink the sales promotion.
5. Improve the physical condition of stores.
6. Launch a marketing campaign to establish Lord & Taylor’s identity.
7. Develop a culture of communication and collaboration.
The road back began with a McKinsey study confirming L&T still had brand equity and could be repositioned for success despite two decades of misdirection. With confidence to move forward, Elfers and her team developed a seven-step action plan that she described as “a very long, complex project with a series of integrated steps.”
She had much to say about closing the 32 underperforming stores, which were mostly in the Sunbelt where L&T had expanded in the Nineties. “It was a defensive play against Federated [now Macy’s Inc.], a huge strategic mistake and a waste of $600 million in capital,” Elfers said. “I knew that rationalizing the real estate portfolio was the number-one initiative. It had to come before everything else. Only after closing those underperforming doors could we begin the process of repositioning Lord & Taylor with a store base that could support it.
“We were now positioned in the northeastern corridor in the best malls in the country as well as in our top freestanding stores. Our geographic base consisted of Washington, New York metro, Boston, Chicago and Detroit.” The retailer operates 47 locations.
SHEDDING THE TONNAGE
Then the remerchandising was launched to eliminate the “tonnage” and bring in updated styles and a new generation of shoppers without alienating the core customer. It wouldn’t be easy because the company had solidified its “mini-May” positioning, with the exact same assortment customers could find at the other end of the mall at another May store. There was more to the problem. “We had completely neglected the casual lifestyle needs of our customers with a total emphasis on dress-up and tailored looks,” Elfers explained.
So out went such brands as Liz Claiborne, Tommy Hilfiger, Nautica, Chaus, Izod, Monet and Playtex, in a huge overhaul that dumped $350 million of moderate and mainstream merchandise to refocus on contemporary, modern and updated classics at primarily better to bridge prices, casual styles and fewer dress-up looks. Misses fits with contemporary styling have also been critical.
“We needed to ensure that we were not going to alienate our core Boomer customer by abandoning her needs, but at the same time we put significant emphasis and urgency on retooling the assortments to be relevant to a new generation of shoppers,” Elfers explained. “We had to focus the merchants and the vendor community on the importance of getting modern and contemporary brands into Lord & Taylor. We continue this same lifestyle approach to merchandising today, and we have been very pleased with the results.
“This massive cleanup coupled with the average retail increase and the [stockkeeping unit] decrease allowed us to significantly clean up and focus the stores. We then took our lifestyle merchandising approach to the selling floor and began to merchandise by lifestyle — contemporary, modern and updated classic.
“If you look at the Lord & Taylor floors today,” Elfers continued, “85 percent of the vendors were not there three years ago and the sku count has been reduced by 45 percent. We have added over 150 new vendors to our resource structure…there are not too many that we want today that won’t at least have a conversation with us. We are certainly in a very different place than we were before the sale.”
IMAGE AND SELLING FLOOR UPGRADES
Along with the merchandise changes came a simplifying of the store layout to remove clutter and make shopping easier, and there was finally funding for store improvements, after about 30 years of spending nothing.
Other key steps: upgrading the direct mail pieces, image advertising to modernize the identity and demonstrate the family appeal, less price promoting and greater regular-pricing, and eliminating coupons in newspapers.
Lord & Taylor got a huge lift in fall 2006 when Macy’s removed the nameplates from Filene’s, Hecht’s and Marshall Field’s — L&T’s toughest regional competitors — and replaced them with Macy’s signs. “We picked up 30 percent in Boston, 24 percent in D.C. and improved our trend by 12 percent,” Elfers said. Then NRDC acquired Lord & Taylor in October 2006.
“They liked the results that we were seeing as well as the huge lane that was opening up for Lord & Taylor, and we wasted no time in filling in the two missing pieces of our original strategy — capital and branding. We committed $250 million in capital over the next five years to renovate all the stores, $10 million for a branding campaign that launched this fall and, in addition, we have a big investment in Creative Design Studios to bring great design talent to all our floors.”
THE CDS STRATEGY
CDS, located in the Starrett-Lehigh Building on Manhattan’s West Side, is a stand-alone company formed by NRDC with a mission to invest in American designers and build them into brands with financial, strategic and infrastructure support. CDS designers include Peter Som, whose company is owned by NRDC, as well as Bryan Bradley, Charles Nolan, Cynthia Steffe and Joseph Abboud. Each designer has a different arrangement with CDS. Som will continue to design his eponymous line as well as the Bill Blass collection. Bradley will continue to design Bryan by Bryan Bradley, which launched last month at L&T, while maintaining his unaffiliated line Tuleh, and Nolan is re-creating the Kate Hill private bridge collection with new product arriving in January, also while continuing with his own collection.
The CDS strategy also entails transforming the existing proprietary brand business at L&T into a full-scale operation that orchestrates the retailer’s design and product development, and wholesales the merchandise to other stores around the world. L&T could carry the goods as well. Steffe next year becomes creative director for the Context contemporary line, formerly a private brand that is slated to be wholesaled. She will also create a collection under a new label. On the men’s side, Abboud will create a new men’s wear label, replacing the Grant Thomas private label.
What else is ahead for Lord & Taylor? Ongoing merchandise upgrades, and additional exclusive offerings including private label and special arrangements with designers, including some under the CDS umbrella. The company also just started a project with the Yacobian Group to improve the in-store experience, Elfers said.
NRDC and L&T have been contemplating plans to renovate and downsize the 600,000-square-foot flagship, which is on Fifth Avenue between 38th and 39th Streets, but no announcement has been made and there has been murmuring that objectives may be changing, and that now, the owners and management may be thinking about preserving more selling space.
Certain suburban sites are getting redeveloped. For example, the Stamford, Conn., store will get a Whole Foods on the bottom level, and the complex will get 500,000 square feet of other shops and restaurants. “NRDC is able to be a tremendous asset to us based on their real estate savvy,” Elfers said.
She also singled out the Internet. “That’s a huge opportunity for us that is currently untapped. We hope to be able to leapfrog some of our competitors who have come before us by using what has been learned to get out of the gate quickly.”