RESTORING THE IMAGE AT BANANA REPUBLIC

Byline: David Moin

NEW YORK — It seems like a distant memory now, but through most of the Nineties, Banana Republic was among the nation’s most admired specialty retailers.
Today, after months of market-share declines, complaints from Wall Street analysts and consumers that the store is boring, and a sweeping management overhaul, Banana Republic has a broad strategy to reverse the tide of negative comp sales and restore its prestige.
At the core of the comeback effort: broadening the chain’s appeal and sharpening its cachet, which Banana Republic president Gary Muto described as “luxury blended with casual accessibility and style.”
During his presentation at the Robertson Stephens Consumer Conference here Wednesday, Muto disclosed elements of the turnaround strategy that he hopes will reclaim consumers and show results primarily next spring and, to a greater degree, by fall. Muto said he is devoting more time to enhancing merchandise, and he’s been freed up for the task after recently having hired Terry Kramer as chief operating officer to oversee the field organization, store operations, distribution, planning and finance areas. Since Muto took command in April, there have been other key hires: Deborah Lloyd, formerly Burberry’s vice president of women’s design, became head of Banana’s product design, and Julie Rosen was promoted to senior vice president of merchandising, planning and production for men and women, to centralize merchandising and further separate it from operations.
“For us, it’s really about fixing the men’s business,” said Muto, who, prior to becoming president, served as Banana’s executive vice president of merchandising. “Overall, the men’s business is tough everywhere, but it is a market-share battle. The important thing is to offer newness and innovation in key categories for men. We alienated our core customer. We became too slick in fashion and too narrow in our focus. We have to appeal to a broader audience.”
Specifically, Muto said that among other merchandise strategies, the chain will be “taking a fresh look at chinos and relaunching them in the spring,” with more options, more neutrals and better colors. Chinos are among the “franchise categories” that Banana will concentrate more on. So are sweaters and blazers. “If you bring newness and innovation, they’ll shop again,” he said.
Broadening the Banana appeal, Muto explained, means a return to “a simpler way of dressing and ease of dressing.” He said it also means adding “diversity of fit and styling, a clarity of offering and a cleaned-up presentation.” He said the chain is working on a “key-item dominance” and returning to more classic silhouettes.
“The days of excess are over. Making our existing fleet as productive as possible — that’s central,” Muto stressed, though he also disputed the notion that Banana Republic, with about 400 stores, couldn’t still expand with more doors. “I don’t think we’ve reached that point of saturation,” he said.
Muto also said that Banana needs to sharpen its appeal to a customer he described as generally older than a Gap customer, seeking a more polished, sophisticated and less casual look. Banana Republic, as well as Old Navy, Gap, GapBody and GapKids, are divisions of the $14 billion Gap Inc. Sales for Banana are estimated at $2.6 billion this year, compared with $2.3 billion last year, according to Todd Slater, retail and apparel analyst for Lazard Freres.
Other strategies Muto cited to help the turnaround are:
Connecting more with high-spending customers, so that a $500 expenditure will entitle a customer to a $25 gift certificate and some free Internet shipping.
Reduced lead time on products for fall 2002 by one month, so that more time can be spent on design improvements.
Adding incentives for sales associates in the fourth quarter to create “a welcoming environment, without a hard-sell, in-your-face attitude.”
Asked if there were inventory changes since Sept. 11, Muto replied: “Not specifically, no. We planned our inventories very conservatively.”

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