SEARS’ COVINGTON: WILL NEW MEGABRAND JUMP-START APPAREL?

Byline: Evan Clark

NEW YORK — Now that the Circle’s out, Covington’s coming in.
In the midst of a Herculean restructuring effort, Sears, Roebuck & Co. hopes to see its new Covington label develop into a national apparel brand fit enough to help turn around its ailing softline business.
The women’s offering in the brand will get prime placement, just off mall entrances, where the Circle of Beauty cosmetics station once stood. The firm pulled out of the cosmetics business last year.
Set to roll out this September in the firm’s 870 doors, Covington is the company’s first exclusive brand extending across women’s, men’s and children’s apparel.
Sears anticipates sales of $200 million to $400 million from the brand next year, accounting for 3.3 to 6.6 percent of the company’s approximately $6 billion apparel business.
On a conference call accompanying the firm’s first-quarter earnings last week, chairman and chief executive Alan Lacy admitted, “We’ve traditionally had a number of propriety brands presented as life styles [and] presented as collections on the floor, which has basically chopped up the selling floor and none of them have really achieved any brand recognition or critical mass with customers,” he said.
The new brand replaces eight other Sears proprietary brands including Crossroads, Fieldmaster and Trader Bay.
For the first quarter, apparel same-store sales were down by high-single digits. Revenues from spring apparel were also down despite an earlier Easter, partially due to lower promotional activity and fewer clearance sales. Overall Sears’ comps dropped by 2.9 percent for the quarter and are expected to continue their decline in the low- to mid-single-digit range for the rest of the year.
Declining comps are indicative of a dip in marketshare as well — a phenomenon experienced by many department stores and national chains struggling with low-cost providers such as Kohl’s.
While declining to be more specific about Covington’s sales goals, Kathryn Bufano, executive vice president and general manager of softlines, told WWD, “We see no limit in terms of what size it can grow to.”
Sears will design and source all merchandise within the program.
Covington’s styling will be “familiar, but new,” said Bufano. “Our customers at Sears like to shop for the entire family — they like classic clothing with a twist. Everything has been built in terms of quality, fit and value.”
Apparently, it’s also been built to stand up to a competitive landscape increasingly dominated by savvy low-cost providers.
“We’ve priced ourselves against our competition,” she said. Prices range from $10 for a children’s jersey to $60 for men’s leather boots.
“In terms of quality and fit, we had a benchmark that is better than our competition at our price,” she said. This entailed taking the technical aspects of competitors’ apparel offering, specifically looking at things like thread count and shrinkage and upping the ante.
“The Covington brand will allow Sears to greatly improve the quality, value and clarity of our mid-range apparel assortment for women, who often are the wardrobe managers for their families,” added Bufano. “Improving our product offering across all apparel categories remains a top priority, which we will achieve by clarifying and deepening our proprietary and national brand assortments.”
With more than $41 billion in annual sales and a nationwide presence, Sears isn’t afraid to throw its weight behind its new baby either.
“We’re leveraging our might — our clout, if you will — behind this brand,” said Bufano. Covington will be promoted through several venues including national magazines and television.
Sears’ “clout” will also help the firm get the most out of its suppliers. The company has 15 foreign buying offices and, as Bufano noted, it’s “a world market in terms of sourcing capabilities.”
All stores will carry the brand in misses’, petite and women’s sizes, men’s regular and big and tall, and all sizes in children’s.
In a statement, Lacy noted, “This new brand represents one part of our overall strategy to improve Sears’ softlines merchandise offering and solidify Sears’ position as the retailer of choice for the home and family.”
The brand was created in response to customer input, which indicated the closets of Sears’ customers were dominated by classic casual apparel.
Retail consultant and Wall Street watcher Walter Loeb noted, “You can make anything a national brand if you put the muscle behind it, because you can advertise it. You can make people believe it already has national recognition, but more importantly, through store promotions, national television and print advertising, you can get brand recognition.”
He added that Covington is “a name that is comfortable and can be used in many areas of the stores. It’s better to have a proprietary brand that customers associate with Sears over the long term” than to use the Sears name for the brand.
“It’s obvious that other mass merchants have been successful doing this,” said Loeb. “If the brand takes hold, it can become an important part of their business.”
As reported, Sears last week posted first-quarter earnings before special items of $110 million, or 34 cents a share, a 37.5 percent decline. Exclusive of the one-time items, though, profits doubled to $300 million, or 93 cents a share.
Sears preannounced the profits, which beat Wall Street estimates by 32 cents, and drove the stock to a four-year high of $54.18 on April 10. Shares of the Hoffman Estates, Ill.-based retailer dipped 80 cents, or 1.5 percent, to close at $53.80 on the New York Stock Exchange Monday.

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