FARAH SETS NEW GOALS, PLANS WOOLWORTH REMAKE
Byline: Mark Tosh
NEW YORK — Calling it a “monumental” challenge, Roger Farah, chairman and chief executive officer of Woolworth Corp., said Monday he is ready to begin an overhaul of the company’s 430 five-and-dime stores in the U.S.
While some of the company’s 40 different store groups are likely to be divested over time, the Woolworth general merchandise business “has a future,” Farah said. “We believe it has great locations.”
He added, “We have new management at our Woolworth general merchandise stores, and we are working hard to rejuvenate and revitalize this familiar concept.”
Farah spoke at the Visual Marketing & Store Design Show during a seminar sponsored by the Planning & Visual Education Partnership. The store design show, at Pier 92 of Manhattan’s Passenger Ship Terminal, ends today.
Separately on Monday, Woolworth named Stuart Kessler, 38, chief operating officer of the general merchandise stores, effective this month. Kessler, who was executive vice president and chief operating officer of Herman’s Sporting Goods, will report to Paul Davies, president and ceo of the division.
Among the goals Farah set for the Woolworth general merchandise stores:
* Raise sales per square foot from about $100 to $200 over the next three to four years.
* Develop a prototype Woolworth that can be used as an archetype for remodeling the entire chain. The company expects to invest $360 million in the overall project.
* Improve apparel sales, assortments and merchandising — or reduce the space devoted to the category.
* Take a more centralized approach to running the stores. In some cases today, up to 40 percent of a single store’s assortment is bought by the manager.
* Pare the 50 major categories Woolworth carries to just the most important.
“We have key locations, but we haven’t done much with them,” Farah told an audience of about 150. “I think the challenge is to do something quickly. Nobody waits forever for you to get your act together.”
He said the chain gets tremendous foot traffic because of its locations, but is “underselling” to each customer. As a remedy, Farah said, Woolworth must improve its presentations to get higher multiple sales.
Woolworth, which had a volume of $8.3 billion last year, operates more than 8,500 stores in 40 different formats, including Foot Locker, Lady Foot Locker, Kinney shoe stores and After Thoughts accessories for juniors. The company returned to profitability in 1994 with earnings of $47 million.
Farah, a longtime department store merchant who began his retail career at Saks Fifth Avenue in the mid-Seventies, was named last December to guide the corporation’s turnaround. He had been president of R.H. Macy & Co. until it was acquired by Federated Department Stores in mid-1994.
On Monday, Farah said the immediate challenge for Woolworth’s stores is to improve its “dirty, sloppy and often out-of-stock merchandise presentations.” The division has 12 million square feet of retail space in the U.S., which Farah said hasn’t “been touched in 40 years” in terms of remodeling and remerchandising.
“It’s a question of where do you begin,” he said. “Even at a fairly modest cost per square foot, it’s going to cost hundreds of millions of dollars to redo it.”
He added, “The way to make money in general merchandise stores is to increase the volume; probably lower our margins, since I’m not sure we’re as competitive as we need to be, and lower our overall expense structure.”
Farah said Woolworth expects to spend a modest $30 per square foot to remodel its stores and will recruit outside talent to help with the overhaul. By next August, the company hopes to begin testing four Woolworth prototype units in suburban, urban and mall locations. He didn’t specify the planned locations for the prototypes or when the entire remodeling project would be completed.
More immediately, Farah said, Woolworth is making efforts to make the stores cleaner, improve lighting and “just get the merchandise straightened out.”
“There’s obviously a lot of hard work ahead of us,” he said.
While the company’s average store achieves sales of $400 to $500 per square foot, Farah said the Woolworth branches “unfortunately” have gross sales closer to $100 per square foot. Part of the problem, he said, is that transactions average about $9.
“If we can’t get up to $200 per square foot in the next three or four years, I would be disappointed,” he said.
In terms of apparel, which Farah said is still a “very large business” for Woolworth, the chain has to develop “a more compelling offering” or reduce its square footage.
He said in recent surveys, shoppers rated Woolworth as the best place to buy certain merchandise categories, but not apparel. He didn’t disclose the categories with the highest ratings.
Surveys also have found that the average Woolworth customer has household income of $42,000, which Farah said is not that far away from the average department store shopper.
“One thing we are not seen as is being credible in apparel,” he noted. “Our apparel assortment today is really a lot of odd-lot buying.” Farah said Target is one store that has shown it is possible to merchandise moderate-priced apparel well.
In a question-and-answer session following his presentation, Farah said the activewear business has soared at the company’s athletic footwear division, with sales up 40 percent. Brands such as Adidas, Nike and Reebok account for the boom, while the sales trend for licensed sports-logo apparel is down.
“Branded apparel has taken a huge chunk of the licensed apparel business,” Farah said, attributing it to the overexposure of sports logos and negative reaction among fans after the baseball and hockey strikes.
Asked about the differences between running a department store and a group of specialty stores, Farah said, “I think the challenge that I’m facing in this business is how to divide my time in 40 pieces. Department stores are really one customer profile in multiple locations. For me, the challenge is how to do business in 40 concepts in 13 or 14 countries.”