BANANA REPUBLIC HEAD EYES NEW FORMATS AND REVIVED CATALOG
Byline: Teena Hammond
LOS ANGELES — On a vacation in Las Vegas last year, Jeanne Jackson, Banana Republic’s president and soon-to-be chief executive officer, won big, but it wasn’t at the casinos.
It was at the Forum Shops at Caesar’s, where she spotted a hunk of prime real estate — a former Boogie’s Diner that went dark after parent Merry-Go-Round liquidated. It was right in a section of the mall where huge crowds gather to gape at laser light shows and statues from Roman mythology that move and talk.
Jackson landed the site for her company within 24 hours.
For a specialty retailer, “it’s the single best piece of real estate in the nation,” she crowed. At the Forum Shops, considered one of the most productive malls in the country, generating $1,200 in sales per square foot, “more feet crossed over the threshold of Boogie’s Diner than anywhere else,” Jackson said.
A 17,000-square-foot Banana Republic flagship will open in August at the glitzy mall, where many stores stay open after midnight. The potential for business, said Jackson, “makes my skin tingle — it’s fabulous.”
Snaring great real estate is Jackson’s mandate at Banana Republic, particularly in light of the chain’s new strategy to open separate women’s and men’s shops, as part of its expansion, and intensify its presence in urban areas, including Manhattan.
The 45-year-old Jackson told WWD, in an interview prior to a speech she delivered at the Harvard Business Association here, that Banana Republic might open units devoted exclusively to home furnishings or to children’s wear, though there are no current plans for such shops.
She also said she is considering reviving the Banana Republic catalog, which was discontinued in 1989.
“We would love to figure out a solution and get [back] into the catalog business,” Jackson said.
In June, when Jackson becomes ceo, a new position at the chain, Marie Holman-Rao will succeed her as president. Holman-Rao is currently executive vice president of design and product development, based in New York. She will move to San Francisco to head the merchandising department.
Jackson, who has been president since May 1995, was in charge of merchandising. She reports to Gap ceo Millard Drexler, who has more than a hand in Banana Republic’s development, even though — according to analysts — Jackson does get involved in setting new directions for the company.
Her role strengthened last year after Drexler started delegating more responsibilities to division personnel involved in product development and marketing. One of her first steps was to hire a new ad agency last December, Baron & Baron, for an advertising campaign that broke at the end of March with the tag line “Make yourself comfortable.”
“She runs things, and Mickey [Drexler] has the bigger perspective, and says if things are right,” said Alice Ruth, managing partner and retail analyst at Montgomery Securities in San Francisco.
Drexler allows Jackson a “strong degree of independence” in her management of Banana Republic, but he retains final veto power on the brand strategy, said Todd Slater, retail analyst for Lazard Freres & Co. in New York.
The promotions reflect efforts to keep the team at Banana Republic intact and give the executives more responsibility, said Steve Kernkraut, retail analyst at Bear Stearns in New York.
Ruth said the promotions occurred after rumors circulated that Jackson was a candidate for president of Ann Taylor, a post that was filled in December by Patricia DeRosa, a former Charming Shoppes executive vice president and longtime key Gap executive.
“I wouldn’t be surprised if Jackson was heavily head-hunted,” Ruth said.
Changes have been ongoing at Banana Republic since Jackson’s arrival in May 1995, particularly remodels, new products and new store formats. The remodeling program begun in the early Nineties is nearly complete. Only one store, in the Fashion Show Mall in Las Vegas, retains the old quirky thatched-roof safari look and has a jeep protruding from the facade. Jackson said the store’s landlord won’t permit remodeling since he considers the jeep a tourist attraction.
The chain has grown from 184 stores in 1994 to 232 units currently. It has established a strong niche with high-income, over-25, white-collar professionals. Over the past two years, departments for shoes, intimate apparel, hosiery, personal care products and home furnishings have been added.
The first store devoted solely to women’s merchandise opened in November 1995; the first separate men’s store opened in November 1996.
Last November, a unit in South Coast Plaza, in Costa Mesa, Calif., was converted to a women’s location, and a men’s store opened just a few doors away. The men’s store is pulling in 2 1/2 times the sales of men’s wear in the previous store. The women’s store is also bringing in more sales than before, Jackson said, but did not release specific figures.
“I think the women’s has benefited because women like more choice,” and that’s available in the new format, Jackson said. “I think men like shopping in their own environment,” she added.
The idea was originally a test. Yet initial sales have been so strong that Banana Republic revamped its five-year plan to allot for more men’s- and women’s-only stores, she said.
There are currently three of each, but this year, more than 30 Banana Republic stores are slated to open, including 17 men’s and six women’s. As part of the expansion, the company will enter seven new markets: Memphis and Chattanooga, Tenn.; Willamet, Ill.; Greensboro, N.C.; Greenville, S.C.; Columbus, Ohio, and Birmingham, Ala.
Each new store will be larger than the average Banana unit, which has 6,000 square feet, but sizes will vary from site to site.
Jackson is scouting for space in Los Angeles, for example, to open a 35,000-square-foot men’s and women’s location. In Honolulu, a 17,000-square-foot men’s and women’s store is scheduled to open in November, and the Chicago store on Michigan Avenue is expected to reopen in December with 14,000 square feet, from a previous 9,000 square feet.
In San Francisco, the existing 15,000-square-foot store will be expanded in October to 32,000 square feet with a “full-blown home department” in the basement, Jackson said. The chain wants to see how home furnishings perform in an expanded environment, Jackson said.
“Apparel isn’t growing; home furnishings are,” she said.
While Jackson isn’t directly involved in product development, she joins Drexler and other executives in New York several times a year to preview products that will be stocked on store shelves in months to come. The items come out of the New York-based design and product development studio, which employs 40 designers. Gap has its own studio, employing about 80 designers.
“He can spot a bestseller from across the room with his eyes closed,” Jackson said about Drexler. “We always had a fine-gauge polo shirt, but [at the preview] we hung up the polo in a new $48 V-neck style and he zoned in on it for this spring. He was so excited about it, the whole room got excited — the designer, the merchant, everyone.”
The staff considered the V-neck a minor fashion item to be ordered in small quantities for each store. Once Drexler saw the shirt, there was a new game plan.
“We changed it to a big one, and as big as we made it, it’s beating the plan,” Jackson said. When Drexler sees something, “he imagines it on lots of people,” Jackson said. “He visualizes them wearing it. He uses the words ‘democratic’ and ‘accessible’ to describe the qualities he wants.”
Merchandise in each store generally turns over every six weeks. A new group of clothes hits the shelves every four to six weeks. The turnover is necessary because the typical Banana Republic customer shops at the store an average of two times a month, while more voracious customers visit twice a week, according to Jackson.
The typical Banana customer, Jackson said during her speech, is different from shoppers at other stores; 56 percent describe themselves as “clothing enthusiasts,” compared with the nationwide average of 37 percent. Their income is high; 32 percent of Banana Republic shoppers have an annual household income of more than $100,000, another 22 percent have between $75,000 and $100,000 and 19 percent are in the $50,000 to $75,000 range. According to the company’s research, nationwide, only 5 percent of the population have a household income of more than $100,000, 6 percent have between $75,000 and $100,000 and 16 percent are in the $50,000 to $75,000 range.
Ruth characterized Banana Republic’s customer base as “pretty much white-collar, definitely educated.” She said they wants newness and quality, but not fads.
Banana Republic does pay attention to fads, but they’re not the focus of the clothing. The spring line, for instance, includes women’s clothing in the popular acid candy-apple green shade, but in classic silhouettes, such as a polo shirt or in a pattern on a wrap skirt. Basics such as a black pantsuit or something in navy are always available, Ruth said.
“They’ve built a foundation by being predictable,” Ruth added. “If you lose your suitcase on a business trip, you know you can go to Banana Republic and find something safe but interesting to wear.”
Still, the stores offers a unique type of European-style clothing, according to Janet Kloppenburg, retail analyst for Robertson Stephenson Co. in New York. “When you go through the mall, there’s really no one who does what Banana does. I think they compete with Emanuel,” she said.
The clothes cost 30 to 50 percent less than clothes from European designers. “They’re basically luring away a customer that has spent years shopping at Saks and Barneys. They’re not taking the Chanel and Gucci customer. They’re taking the European bridge customers and converting them at lower prices,” Kloppenburg said.
Prices of Banana Republic’s clothing have increased about 10 to 20 percent in the past year, said Kloppenburg. While some shoppers have complained, they generally have not turned away, she said, adding that the company seems to be responding by planning to lower prices of some key items in the second quarter.
Jackson said higher prices reflect higher-quality fabrics and workmanship. Women’s jeans that used to sell for $48 were restyled with flat seams and ring-spun denim and now retail for $58, she said. Jackson also acknowledged there are some lower-priced items on tap, but that’s because of “the natural rhythm of the business.” In addition, prices are generally lower in warmer months, with the influx of shorts and T-shirts.
“We happen right now to be on a T-shirt cycle where T-shirts are selling like crazy,” Jackson said. A woman’s cotton crewneck T-shirt retails for $18 at Banana Republic; a nylon version is $34.
In the higher-priced areas, Banana Republic sells lined cotton ivory blazers with tortoise-shell buttons at $248, and with matching pants, $128; a sleeveless ivory silk shell, $68, and brown sandal embellished with tortoise-shell, $122, completing the ensemble.
Dresses include $118 ankle-length rayon knits and $138 sleeveless rayon dresses.
Banana Republic generally is predictable, but tries to evoke an adventurous and fun spirit with such items as printed ties and boxer shorts.
“The best-selling boxer shorts are printed with giraffes,” Jackson mentioned during her speech.
Ruth estimated that, last year, Banana Republic pulled in $825 million in revenues, an 18 percent increase from 1995. Pretax income jumped an impressive 42 percent to $95 million in 1996. In 1995, revenue of $700 million reflected an increase of 25 percent from the previous year, and pretax income of $67 million was an impressive 34 percent increase.
Per-square-foot sales averaged $610 in 1996, compared with $570 in 1995 and $530 in 1994.
Jackson, who joined the chain just when it started to turn around from flat 1994 income figures, has “enhanced” what Drexler had already begun, Ruth said.
Just two weeks after starting at Banana Republic, Jackson made her first major change in store design.
“I walked in one of our dressing rooms and it had fluorescent lights. Now, everybody knows what fluorescent lights do to women.”
The unflattering lights were removed and softer ones installed, and the white walls were repainted a soft yellowish cream.
Many more changes were implemented as Banana Republic saw a need to remodel stores to reflect characteristics of local communities. The Beverly Center store in Los Angeles expanded last year from 2,800 square feet to 10,000 square feet and was remodeled with curving arches and black and white photographs of legendary movie stars. The two-story, 9,600-square-foot Miami Beach location opened in February 1996 and has an Art Deco mural and motif, track lighting and chrome ceiling fans.
When Jackson was a student in the MBA program at Harvard Business School, she intended to join the package division of General Foods. Then, everything changed. She was working as a bartender when one morning at 2 a.m. she met Frank Arnoni, the man who would inspire her to make a major career switch. He was then president of the now-defunct Weinstock’s department store chain, but was in Cambridge, Mass., to teach an eight-week management class at Harvard. When he learned that Jackson was a graduate student holding down two jobs — bartender by night and short-order cook by day — he told her anyone who worked that hard should be in retail.
She took his advice after graduating in 1978 and moved to Los Angeles, joined Bullock’s management trainee program, later holding positions in merchandising and operations. Her next move was to Saks Fifth Avenue in New York, where she spent three years and left as senior vice president and general manager of private brands. She joined The Walt Disney Co. in Orlando, Fla., where for three years she was senior vice president of the merchandising group, and then was executive vice president of merchandising at Victoria’s Secret for three years before joining Banana Republic.
She lives on the peninsula south of San Francisco with her husband and their nine-year-old daughter and six-year-old son. But on some Saturdays, when she’s in a pair of jeans, she’ll don a baseball cap and discreetly visit a few stores to see what motivates customers’ selections.
“It’s about seeing them feel a suit and taking it into the dressing room because of the feel of the fabric,” she said.
Her challenge is to maintain a distinct position — and growth — for Banana Republic in an oversaturated retail market.
By targeting an aging audience, Banana Republic avoids cannibalizing Gap’s more youthful core customer, Lazard Freres’ Slater said.
He also said Banana Republic would remain successful if it continues to differentiate from Gap and attract a more upscale customer. Although there is some room for growth, Slater cautioned that the company should carefully select new sites so it doesn’t “dilute” the brand, and remain true to its plan.
“I don’t see Banana Republic as a 600-store chain,” Jackson said.
However, expansion is a hot issue at Banana Republic, and outside the company, there’s enormous curiosity about international moves. Currently, Banana Republic operates almost entirely in the U.S.; it has a handful of stores in Canada, while the Gap division has 176 international stores.
The infrastructure required to open stores overseas is “incredible,” Jackson said, but it’s a possibility in the future, provided such an infrastructure is established and Banana Republic maintains its quality and strong style appeal.
There’s another reason Banana Republic’s clothes are hot: People are upgrading their casualwear to a dressier look, Jackson said during her speech. “As you age, you step up your dress,” she said.
“Instead of wearing jeans and a polo to a friend’s for dinner, now it’s chinos and a beautiful sweater.”