Justice will have its “big reveal” on July 19.
That’s when the $1.4 billion tween chain will drop prices and curtail promotions, and the competition will heat up against arch rivals J.C. Penney Co. Inc. and Kohl’s Corp. The 1,000-unit chain, which caters to girls seven to 14 years old, also competes heavily against Wal-Mart, Target, Gymboree, The Children’s Place and Old Navy.
“We’re taking the ticket down dramatically — about 40 percent on that core product representing about half of the units in the store,” said David Jaffe, president and chief executive officer of Ascena Retail Group Inc., which operates Justice as well as Maurices, Catherines, Lane Bryant and Dress Barn, and last month struck a deal to buy Ann Inc. for $2.2 billion.
The new pricing architecture at Justice, said Jaffe while speaking at the 15th annual Oppenheimer Consumer Conference Tuesday, “is based on what the out-the-door price is at Penney’s or Kohl’s — and meeting or beating their prices.”
Lower prices will also be seen on noncore, more fashionable product, “which differentiates us from our competition,” Jaffe said. “We are going to reduce those prices from last year…and intersperse category promotions as necessary.”
“Forty-percent off the entire store events — which we became famous or maybe infamous for — are now completely gone,” Jaffe said. “Every year about a third of our customer base gets turned over. That knowledge of 40 percent off, or whatever the deals were, slowly goes away.” Last fall, Justice was at least 40 percent off every day of the season, damaging margins.
“We will go into back-to-school with very clean inventories and a whole new pricing and marketing cadence,” Jaffe said referring to the strategy as the “big reveal.” The chain, which has been trying to restore profitability, is “returning to its old days of really being about having fashion at a value,” Jaffe said.
Jaffe acknowledged there have been other reasons, aside from its pricing, for the recent performance at Justice. He said the chain got “a little out of whack in terms of our fashion pyramid” with “high fashion, over-the-top items,” the kind girls would buy for parties or other special events, comprising 40 percent of the assortment. Now the high-fashion items have been trimmed to 20 percent of the offering.
“Our customers didn’t like the fact we didn’t have enough everyday fashion,” Jaffe said. “Our girls go to school. They need everyday fashion. The fashion pyramid is back in line for back-to-school.”
In March, Brian Lynch, formerly of Ann Taylor, joined Justice as president. Justice also recently closed its Brothers boys business, which was sold online and in about one-fifth of the Justice stores, to focus on improving girls’ marketing and merchandising.
Jaffe said Penney’s and Kohl’s do huge volumes and have a lot of fashion in children’s wear, “but not fashion to the level we do” at Justice.
But one retail ceo said, “It’s not the prices at Justice. They need to focus on fixing the product. Customers, especially in the kids’ market, want a discount. Kids is the most competitive space. If Justice gets their merchandise turned around, that could hurt the competition, but taking out promotions in a highly promotional environment is risky.”
“Kids is a very crowded, competitive field. There’s a ton of square feet out there — too much capacity chasing too little demand,” said Craig Johnson, president of Customer Growth Partners. “At Justice, the core issue is they’re competing with very low-price, basic product. That’s where Old Navy does a very good job. The strongest part of Old Navy is kids. Justice may not be able to match Old Navy on a dime-for-dime basis, but has to get at least in the ballpark. Getting away from everything being always on sale and doing more targeted category promotions or promotions targeting slower movers is generally a better idea. You want your best product to go at full-price, rather than giving it away, and then you do category promotions or seasonal sales or sales on slower-moving products. If you are a good retailer with good products, it will sell at full price.”