Paulette Garafalo has made a career out of growing classic American men’s wear brands and her latest role as chief executive officer of Paul Stuart represents yet another challenge: How to modernize the 78-year-old brand without compromising its heritage.
This story first appeared in the November 2, 2016 issue of WWD. Subscribe Today.
In her first sit-down interview since taking over as the first non-family member to helm the venerable retailer in June, Garafalo outlined her plans, which include a complete renovation of the 45th Street flagship in New York; the opening of other stores around the world; expansions into additional product categories, including in women’s; the appointment of the company’s first creative director, and the launch of a rebranding campaign.
Garafalo is not alone in her drive to blow the dust off of Paul Stuart — she has assembled a team that includes Jarret Kerman, a former Brooks Brothers executive who is now senior vice president of strategic growth initiatives. He joins Bob Green, chief merchandising officer; Ralph Auriemma, the newly anointed creative director, and former Bergdorf Goodman chief men’s merchant Margaret Spaniolo, who is consulting on the store renovation project.
“As we begin our journey to restore and renovate our flagship, Margaret will be working with Bob and his team to build new product categories and optimize every square foot of this building,” Garafalo said, pointing to the 60,000-square-foot store. “She built a $90 million business [for Bergdorf’s] so if she helps us add another $20 million, we’ll be in good shape.”
The renovation is slated to begin next year and will include a careful overhaul of the two-level store that will see the addition of such categories as sunglasses and personal-care items, as well as the relocation of the women’s department to a more-visible spot on the main floor from its current hiding place on the mezzanine. Windows to the street will be opened up, allowing passersby to see inside. A made-to-measure/custom area will be installed and a personal shopping service instituted.
All of the changes are being done with the blessing of Mitsui & Co., Paul Stuart’s longtime Japanese licensee, which purchased the business from the founding family at the end of 2012. Mitsui’s relationship with Paul Stuart dates to 1975 when it began to import the retailer’s private-label merchandise into Japan. Today there are more than 100 in-store Paul Stuart shops in Japan, as well as two flagships in Aoyama and Ginza in Tokyo.
As ceo, Garafalo succeeded Michael Ostrove, the third generation of the family that founded the business in 1938 and who was instrumental in selling the business to Mitsui.
Garafalo has a strong background in the men’s luxury business and is also well-versed in women’s, wholesale, e-commerce and the international market. For the five years prior to joining Paul Stuart, she was president of international, wholesale and manufacturing at Brooks Brothers. Prior to that, she was ceo of The Americas for Bally and ceo and group president for Hickey Freeman, which was part of the Hartmarx Luxury Group.
“I like to touch and feel the business,” she said. “So it was like coming back to my roots. I like to put the pieces together and create a team to develop the business. Any success I had at Hickey Freeman or Brooks Brothers was all about the people.”
She said Paul Stuart having a Japanese owner was also a selling point for her. “The fact that Mitsui owned the company was one of the top three reasons I came,” she said. “I was in charge of Brooks Brothers Japan, so I was very comfortable with the culture. And Mitsui is an amazing company that has the financial strength to allow us the time to grow.”
She said that while Mitsui is one of the largest trading companies in Japan with interests in energy, machinery, chemicals, food, textile, logistics, finance and more, Paul Stuart is its first fully owned apparel business in the U.S. And it is committed to growing the asset.
Garafalo said she has enormous flexibility to make the decisions she believes are necessary to set Paul Stuart up for the future. Step one was hiring Kerman and Spaniolo and elevating Auriemma to his new role. Auriemma, who has been with Paul Stuart for 13 years, was previously in charge of the Phineas Cole collection, the retailer’s youngest-skewed line. As creative director, he will now “set the vision for all product,” Garafalo said. “He will set seasonal themes for all categories and we will have a more-comprehensive brand presentation.”
In addition, the company will tweak the price and positioning of its core product. Most suits average $1,600 to $1,800 for an off-the-rack, full-canvas product. Phineas Cole, which is targeted to a Millennial shopper, is the most expensive product in the store, selling for around $2,100. Garafalo said the pricing is counterintuitive since it’s intended to appeal to a younger guy. (Starting for spring, Phineas Cole’s prices will be adjusted and the collection will now serve as the retailer’s opening price point, selling for around $1,500.)
In addition to product changes, Garafalo revealed that the company has hired a branding agency, New York-based Studio XL, to “set a clear road map of the Paul Stuart DNA and help create a vision and mission going forward,” she said. The first pieces of that plan will be ready later this month.
Simultaneously, she has hired the architectural firm Design Republic to revamp the flagship. The work will begin in January. She acknowledged that the store “needs to be cleaned up,” with improvements made in the lighting, carpets and other features. “But what some perceive as dusty, others perceive as private,” she said, calling the store “a club” and saying that the wood displays and accents as well as the classification approach to merchandising will be retained in the renovation. “That will not change,” she said.
“We make shoes for people with two different size feet. All our robes are made in this store and have been for years. Our brace business is probably the biggest in the country and our sock business is off the Richter scale,” Garafalo added. “But we also need to reach out to a new customer base and make everything fresh. But we’re going to be very careful because the customer we have is a good one.”
While Garafalo has made a lot of changes since taking over as ceo, she believes the retailer’s staff is eager to get behind her as she works to capture the “low-hanging fruit.” This includes the expansion of the company’s nascent e-commerce business, which will fall under the purview of Kerman, as well as its social media presence. He will also oversee the expansion of Paul Stuart’s made-to-measure program. “That will be an important part of our business going forward,” Garafalo said, noting that it is growing at more than 50 percent a month.
E-commerce is growing at a rate of 40 percent a month, but the company has barely scratched the surface, she believes.
Kerman will also “look at opportunities outside Japan,” she said. In that country, Paul Stuart is a much bigger business than it is in the U.S. Here, in addition to the flagship, it operates two units in Chicago and one in Washington, D.C.
Garafalo declined to provide volume figures for Paul Stuart in the U.S. or internationally, but when Mitsui bought the company in 2012, Paul Stuart Japan had sales of $133 million and plans called for growing that number to $231 million by 2015.
At one point, Paul Stuart also had a presence in South Korea, but it exited the market. Going forward, Garafalo is “actively pursuing partners in other markets,” including South Korea and China. What’s not on the short list is bringing the brand to Europe, she said.
Rolling out other stores in the U.S. is also on the back burner. “We just opened Washington, D.C., and we’re renovating the flagship, so we’re not ready for anything else yet.”
But growing its existing business in America is in the cards. Garafalo said former Brooks Brothers and Ralph Lauren executive Krista Lynch has come on board as Paul Stuart’s women’s merchandiser. The women’s area represents a minuscule 3 percent of sales, so there’s “a big growth opportunity there,” she said. “We’re going to move it downstairs, remerchandise it and add new categories such as fine jewelry, gifts and beautiful bags.”
One thing that won’t be changing is Paul Stuart’s “amazing” sales staff, many of whom have worked for the retailer for decades. “It’s such an asset,” she said. “Their knowledge of the product is extraordinary and they are not just ‘clerking.’ They run their own businesses. “If we can get 200 more customers, we’ll be set for the next 10 years.”
Garafalo believes she’s up for the challenge and has every intention of following through on the promise she made to Mitsui when she took the job.
“I committed that I would give them a luxury American brand in three years,” she said. “We just have to dust it off and move it forward.”