WILSON: MAKING ITSELF THE BRAND
Byline: Arthur Friedman
NEW YORK — Wilsons The Leather Experts wants to become Wilsons, the leather brand.
The 550-unit specialty store chain, based in Brooklyn Park, Minn., is already considered the largest leather apparel retailer in the U.S., with stores in 44 states, as well as Canada and England.
But now the company has embarked on a multifaceted image campaign designed to turn its name into the “dominant leather brand in the country,” said Joel Waller, chairman and chief executive officer.
Interviewed at the Wilsons store at the Woodbridge Center mall in Woodbridge, N.J., shortly before leaving for Italy “to develop new leathers,” Waller compared the concept to the way chains like The Gap and Victoria’s Secret have created a national or global brand by focusing tightly on product, image and presentation.
“Ten years ago this was a commodity business, selling leather by the pound,” said Waller, who was part of a team of executives that led a leveraged buyout of the chain from CVS, which itself was spun off from Melville Corp.
“Leather apparel sales peaked around 1993 at $2.7 billion at retail,” he continued. “Since then, they have declined to about $1.7 billion with the advent of new outerwear fabrics and changes in lifestyles. We own about a 20 percent market share, so we’re starting from a good base in developing Wilsons as a brand.”
The changeover in store presentation and merchandising began about a year ago, Waller said, but is in full swing for this fall. Following the success of the likes of Abercrombie & Fitch and American Eagle, as well as Gap and Old Navy, Wilsons is targeting the Echo Boomers, while not forgetting its older Generation X and Baby Boomer customer.
“Research has showed us that the Echo Boomer or Gen Y demographics represents some 30 million people and is going to continue for seven to eight more years,” Waller said. “But it’s risky just targeting a junior customer, and some of those brands and stores have had a volatile history. But we’re not as volatile, because we’re in the leather business, not the junior business. With that said, the young customer is still a big factor in our repositioning.”
As the chain’s merchandise became more fashionable and trendy over the past couple of years, Waller felt the look of the store needed to be transformed.
During a visit to a California branch with a young clientele and a good track record, the store manager apologized to Waller for the loud music that was playing. The manager explained that his customers were drawn by the sound. Waller told the manager not to turn down the volume, and now contemporary tunes may be heard in all Wilsons stores.
Similarly, after observing a pierced-lipped, orange-haired sales associate — who had placed third in a nationwide sales contest — and hearing her explain why she was able to sell so much to her contemporaries, Wilsons has changed the criteria for store personnel to fit a more with-it image.
“The image of the store, the merchandise, the presentation and the people in the store are all related,” said Waller.
Wilsons has repositioned its four store labels to have a sharper focus and point of view. Maxima is the women’s teen label. For fall, it features suede A-line maxicoats, suede shirt jackets, lamb leather two-way zip-front jackets and puffy leather jackets. There are also sportswear separates such as coordinated miniskirts and corset tops, scuba vests and pants, camisoles and HotPants, and maxiskirts. M. Julian is the young men’s collection.
Pelle Studio for women and men is the contemporary line. In women’s, it includes parkas with faux-fur trim, short lambskin blazers with zippered lipstick pockets, hooded duffel coats with toggle closures, and long trenches.
The Wilsons main label is the value-based line, concentrating on more mainstream looks and traditional styles. All the labels now incorporate the Wilsons name, and the other brands carried in the store, such as Andrew Marc and Nine West, are co-branded with the Wilsons label as well.
Waller said the two junior labels made up 38 percent of sales last year. This year sales are tracking at 50 percent of the total revenue. Women’s apparel makes up about 45 percent of apparel sales, he added.
In accessories, key items have been suede and leather bodypacks and leather backpacks in a range of sizes. In addition, Wilsons does a big business in its leather briefcases and computer bags, as well as in wallets and day planners.
Wilsons hired photographer Matthew Rolston, most recently known for the award-winning Gap Swing TV commercial, to shoot the visuals for the fall collections, which are used for in-store and window displays, print advertising and the press kit.
As evidenced by the Woodbridge store, which is on track to do $1.5 million in volume this year, the four Wilsons labels are now presented in miniboutiques throughout the store, with lifestyle images and three-dimensional lettering. Merchandise is moved around the store depending on the time of year and that week’s promotional vehicle, such as a Viva Italia campaign and contest going on this month.
The ads and displays also incorporate slogans such as “People Notice When You Wear Wilsons Leather,” and “Wilsons Leather, Slip Into It.”
Wilsons is a vertically integrated operation. It purchases its own raw materials from Italy and Asia, manufacturing in five Asian countries, with a central warehouse in Hong Kong and a large distribution center in Minneapolis. The company works with about 18 key tanneries and 15 major apparel and accessories factories.
“Five years ago, it took us 180 days to go from concept to customer,” Waller said. “Today we’re down to 90 days, and my goal is to be below 70 days by next year. It’s done by controlling the process every step of the way. In 1989, we had 110 employees outside of the United States. Today, we have less than 50, with better quality control and better systems.”
Every one of the overseas employees has a laptop computer and a cell phone. When a design change is made in headquarters, the information is instantly sent to the appropriate people.
Another vital change in philosophy allows for micromerchandising clusters of stores instead of chainwide merchandise planning. This allows for more fashion-forward styling in East and West Coast stores, for example, and more basic merchandise in the Midwest. Also, by improving point-of-sale systems, Wilsons has greater capabilities for stock replenishment and for buyers to get feedback and style performance.
Currently, Wilsons has about 475 mall stores, 30 airport stores, 40 Wallet Works leather accessories units and 16 outlets stores. Waller feels the biggest growth will come from the airport shops and the outlets, where liquidated merchandise and specially developed goods are sold. Overall, he expects about 40 to 45 more stores next year across the country and across store concepts.
Another growth area and profit center is what Waller calls holiday stores — temporary stores or kiosks in malls, which operate from October to January or February. In the next few weeks, Wilsons will open about 350 temporary full-range stores and about 25 accessories kiosks.
“They give us an infrastructure to liquidate merchandise and test new ideas or new malls,” Waller said.
A great majority of the mall stores are Wilsons, but there are still some Georgetown Leather and Tannery West units that were acquired in the early Nineties. Some of these stores have been converted to Wilsons and even the ones that haven’t now carry the Wilsons brand and its sub-brands.
“Every time we’ve acquired a business we’ve learned from it,” Waller said. “Georgetown Leather had a great executive luggage and accessories business, and we took that concept to the airport shops. We continue to look for acquisitions that would benefit the company, and might even get into wholesaling in the manner of operating leased departments in certain stores like the way some fur departments are handled.”
Companywide, accessories make up 30 percent of overall volume, which Waller projected would hit $505 million to $510 million this year. In the Wilsons stores, accessories account for 26 percent of sales.
For the most recent quarter ended July 31, sales climbed 15.5 percent to $52.8 million from $45.7 million, and gained 9.7 percent on a same-store basis. At the same time, however, the company widened its loss to $12.9 million from $11.9 million. The quarter included a $839,000 charge for the early retirement of debt, and the retailer noted that it typically shows a loss in the period, as a majority of its business is done in the fall.
Gross margin improved to 12.5 percent from 9.7 percent, while selling, general and administrative expenses were trimmed to 45.3 percent from 45.7 percent
In the half, the loss narrowed to $15.9 million from $16.4 million. Sales lunged forward 17.2 percent to $133.3 million from $113.7 million. Net income for the year ended Jan. 30, 1999, increased 17 percent to $18.2 million compared with $15.6 million, excluding certain nonrecurring items in 1997.
Earnings per share on a diluted basis increased to $1.66 against $1.50, excluding certain nonrecurring items a year ago. Analysts are projecting earnings of $2 to $2.05 a share for the year ending Jan. 31, 2000.
Sales in 1998 increased 10 percent to $459.4 million from $418.1 million the previous year as a result of a 6 percent comp-store sales increase, the acquisition of Wallet Works outlet stores in May 1998, and new store openings.
Analysts are high on Wilsons efforts in building its franchise and focusing on brand development, especially its emphasis on the junior customer.
“Overall, we look at them as the only major retailer of leather goods, coast to coast,” said Jack Nielsen, who covers Wilsons for RJ Steichen & Co. “They compete with department stores for leather outerwear at price points that are very competitive, generally below $250.”
Neilsen said consumer acceptance of the company’s new merchandising efforts has been “pretty significant, particularly the emphasis on the junior labels.”
Jeffrey Stein, an analyst with McDonald Investments Inc., said he estimates that Wilsons controls about 15 percent of the total U.S. leather outerwear market, which he said is a $2 billion sector. Wilsons has about 3 percent of the leather accessories market, which he put as a $4 billion segment.
“We see main growth in two areas: the junior leather coat business, which has seen rapid growth this year, and leather accessories, which represents a great opportunity,” Stein said. “From 1995 to 1999, Wilson’s accessories sales as a percentage of overall business has grown from 20 percent to 29 percent. That’s important because accessories produces a higher gross profit margin than outerwear.”
Stein said Wilsons is also positioned well this year, citing the current trends toward leather in fashion. He noted, as did Waller on a trip through the mall, that Gap last week ran a leather promotion that he said “in essence was free advertising for Wilsons,” and helped produce strong sales gains for the week.
“They are already the largest retailer of leather outerwear and accessories in the country,” Stein said. “They have the same opportunity to do with leather coats and accessories what Nine West did with shoes. It’s a vertically integrated company with strong sourcing and quality control and a good management team.”
Stein and Nielsen each projected an 11 percent sales gain this year to $510 million, and Neilsen added that an 8 percent gain is forecast for 2000.
Waller said the overall advertising and marketing budget hasn’t been expanded as much as refocused. National advertising has been decreased, while store presentation and print magazines, particularly teen publications, have been given more emphasis.
“The branding of Wilsons is ahead of the curve in our plan,” Waller said. “We haven’t chased away any customers and have attracted lots of new ones.