ROCHELLE PARK, N.J. — Following seven consecutive months of comp-store sale gains and eight months of customer transaction increases at its Avenue-branded retail chain, which caters to plus-size women in 514 stores, United Retail Group Inc. clearly is seeing momentum in its turnaround.
But even as the company’s recent success shows that plus-size women are eager for fashion and product differentiation, chief executive officer Raphael Benaroya along with his team of designers, merchandisers, managers and sales associates are not resting on their laurels. Instead, they’re using the company’s current success as motivation to drive the business further.
“Usually, success breeds more success,” said Benaroya during a recent meeting at United Retail’s offices here. Lately, he said, the entire company “tends to think more like winners, and does things in a way that exudes more confidence,” which has only added to Benaroya’s sense that he made the right decision to overhaul Avenue’s merchandise selection in spring 2003.
Benaroya, who’s been at the helm of United Retail since 1989 as ceo, president and chairman, realized two years ago that he didn’t like anything in Avenue’s stores, which were full of basic apparel items. Knowing that “the large-size customer really is subject to the exact same [fashion] stimulations of its smaller counterparts,” Benaroya came up with what he calls a “product-centric transformation.”
To that end, Avenue now concentrates on coordinating its proprietary clothing choices so customers can easily mix and match, Benaroya explained. In addition, seasonal lines are created with a mix of coordinated career to casual to “urban hip” separates to allow shoppers to easily shift from daytime to nighttime events.
A design mantra at Avenue is to create apparel with the aspirational, independent and confident attitudes of its target demographic foremost in mind, as opposed to focusing first on its core customer’s size. Avenue serves women sizes 14 to 32 with moderate price points geared toward “middle-mass” consumers.
Before working to reposition the retailer two years ago, Benaroya knew that instituting operational and merchandise changes would financially hurt the company in the near term. But he went ahead with the strategy anyway. “I felt we either take tremendous punishment now, or we take more punishment five years from now,” Benaroya said.
The company spent $17 million on store renovations to accommodate its new brand image, which also included upgrading information systems at its distribution center, improving inventory management and closing underperforming stores.
These changes had a positive effect on financial results in the most recent fiscal year. The company narrowed its loss to $10.5 million from a prior-year loss of $19.1 million, while total annual revenues rose by 0.8 percent to $399.3 million. In the latest fourth quarter, United Retail swung to a profit of $697,000, versus a loss of $4 million in the prior year. More importantly, Avenue stores posted the highest volume and margin dollars per store since the fall of 2000.
Wall Street reacted positively to these improvements. United Retail’s stock price jumped roughly 80 percent in the last 52 weeks, to about $5.50.
Meanwhile, Benaroya hopes to eventually expand the Avenue brand to around 1,000 stores, and said that in doing so acquisitions won’t be out of the question. “We believe expansion of the business will not come just from opening new stores,” he said. “We’re not shy to acquire if the right one comes along.” The company had $12.6 million in cash and cash equivalents on its balance sheet as of Jan. 29.
United Retail, formerly a unit of The Limited, now Limited Brands Inc., created the Avenue brand in 1991 when it converted stores from two other plus-size retailers, Size Unlimited and Lerner Woman, both owned by The Limited at the time, to Avenue stores.
Among the company’s current growth prospects is its e-commerce business, which Benaroya believes surpasses any need to offer a print catalogue. After reporting a wider quarterly loss in early 2003, Avenue ceased its catalogue operations, citing weak sales and promotional pressures. Benaroya does not expect to offer a traditional catalogue again.
“I’m convinced that the future of the catalogue business is in the Internet,” he said, referring to the proliferation of at-home Internet usage. Online sales at avenue.com rose 30 percent in 2004 over 2003.
Not only is Benaroya optimistic on the future of Avenue, he also is looking forward to the future of plus sizes in the entire retail market. If retailers aren’t offering them already, Benaroya said he is eventually “expecting every brand to go into plus sizes.”
After all, as Benaroya can certainly attest: “This business requires constant change.”