WEATHERVANE CHARTS NATIONAL EXPANSION

Byline: Thomas J. Ryan

NEW YORK — Backed by another equity investment, Weathervane is plotting a course to become a national junior retailer.
The chain, based in New Britain, Conn., emerged from bankruptcy last year and now does about $60 million in annual volume. It operates 68 stores, largely in the Northeast, and it plans to open between 15 to 25 more stores with the help of a new $5 million investment led by LLR Equity Partners. Weathervane sees the potential for 500 stores in suburban malls in the U.S.
“The strengthening of our infrastructure, modernization of existing stores and new store development has been extremely rewarding,” said president and chief executive, Larry Davidson Jr.
LLR’s investment not only will fund expansion, but also the renovation of existing stores to a new 2,800-square-foot prototype, down from its average store size of 4,000 square feet. In the last 18 months, it added 23 stores and renovated another 10.
Weathervane continues to benefit from its target shift in the mid-Nineties from misses’ customers to juniors, though the transition hasn’t been easy. Trapped in numerous bad leases and the costly shift, it filed for bankruptcy in February 1998. With the aid of a $5.5 million investment by GB Equity Partners and a $10 million credit line from Paragon Capital, it emerged in summer 1999 and has continued to show robust results.
In its recently completed back-to-school period, sales increased 23 percent overall and ran up 10 percent on a same-store basis, Davidson said. In September, sales jumped 38 percent with comps up 21 percent. New stores are averaging annual sales of $1 million, or about $360 per square foot in the first year.
Healthy demographics are helping, with the teenage female population expected to grow at twice the rate of the general population over the next 12 years, Davidson said. Young women between the ages of 12 to 19 are expected to increase 11.6 percent to 16.6 million during this time period, and female teens spent $58.6 million last year, 38 percent of that on apparel and jewelry.
Davidson also believes Weathervane is benefiting from internal efforts to create more of a “cookie-cutter image” for the stores by standardizing fixtures from mannequins to photography and music. Tables have been added to display folded merchandise instead of solely using hanging racks.
“The in-store shopping experience has been elevated and we’re trying to make that consistent,” said Davidson.
The new prototype has proven to be a big success, and about 85 percent of the stores will converted over the next three years, he said.
“What we’ve seen is that our productivity goes up and our volume doesn’t go down,” he added. “So, it gets rent costs in line and you don’t lose anything on productivity.”
Customers are also responding to its value prices, which tend to run lower than American Eagle Outfitters and higher than Old Navy. Jeans are priced in the mid-$30 range; tops, including sweaters, are between $15 and $30, and outerwear is just under $100. The items are all sold under the Weathervane label, except Skechers and Vans in shoes.
Davidson believes Weathervane is building a loyal following by meeting the customer’s need for fashion and fit.
“We’ve had a terrific sweaters and knit tops business and our bottoms business continues to be very strong,” he said. “We are a key-item business and all key items in all new categories such as sweaters, knit tops, woven bottoms and denim have been running very strong.”
Regarding expansion, Weathervane entered the Midwest two years ago with the acquisition of Edison Bros., which owned, among other chains, the 5-7-9 Shops. Customers there have shown “great acceptance” of the concept, particularly in Detroit and Grand Rapids, Mich., he said.
Seth Lehr, a partner at LLR, a $260 million private equity fund that invests in latter-stage growth companies and middle-market firms, said he believes the new prototype “is ready for an aggressive, national rollout,” noting that renovated stores are producing same-store gains over 25 percent the prior year’s. “That’s amazing,” he said.
Lehr said Weathervane’s concept is similar to Children’s Place, a vertically operated mall-based chain featuring value prices.
Lehr was impressed by the third-generation management team that has weathered a bankruptcy, and also believes expansion efforts will clearly benefit from new members to its advisory board: Stan Silver, former chief operating officer at Children’s Place, and Steven Erlbaum, former head of David’s Bridal, a bridal chain sold earlier this year to May Department Stores.
“We think there is enormous room for growth,” said Lehr. “We’re long-term investors.”

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