Nautica is changing tack once again.
The sportswear brand, which was founded by David Chu in 1983 and bought by VF Corp. in 2003, has experienced its share of challenges and tried a number of different strategies over the past several years as it tries to navigate through the U.S. retail environment and the increasing competition from new and established brands offering a similar aesthetic. Heavily penetrated in the department store channel in the U.S., Nautica has been haunted by those stores’ dependence on promotions to drive sales.
But the label, led by Karen Murray, president of VF’s sportswear coalition, has developed another new game plan to get it back on a growth trajectory.
Nautica has global retail sales of around $1.3 billion, with over $500 million of that coming from the U.S. sportswear business.
In 2014, the brand’s revenues were flat, with a midsingle-digit decline in its wholesale business and growth in the low teens in its e-commerce sales, according to its parent. In the second quarter of this year, revenue was down in the low-single digits and VF is expecting the brand to continue to face difficult conditions in America for the remainder of this year.
Internationally, Nautica operates 244 full-price stores and has 50 licensees in 75 countries. Women’s wear is also a major part of the business overseas, where the brand is seen as upscale and aspirational.
But the picture is different in the U.S., where Nautica has long been seen as a promotional brand. Adding to that image is the fact that it operates only outlet stores in America — currently there are 85 scattered around the country, and it does not offer women’s merchandise.
Murray promises that, starting next year, things are going to be different.
In her first sit-down interview on Nautica’s reinvention, she revealed that the brand will revamp its product offering into three different tiers, open full-price stores and reduce the number of outlets.
“This is a very big, dramatic change for Nautica,” she said.
These changes come as a result of a recently completed consumer segmentation study where the company interviewed 15,000 people about their sportswear purchases and the Nautica brand. The findings were that a certain man — dubbed the “style captains” by the study — accounted for 20 percent of all sportswear purchases but 36 percent of all Nautica purchases. These customers care more about style than performance, they seek to look sophisticated and current, and while water — the centerpiece of the Nautica brand for over 30 years — is important to them, it’s seen more as a place to get away from their daily lives than as place to get wet and wild.
As a result of the study, Nautica committed to target these consumers and has come up with a new brand-positioning statement: “Inspired by the sea, designed in the city.”
The most visible change will be in the product.
Just over a year ago, Nautica brought Trudi Roach on board as vice president of global product, followed shortly by Steve McSween, vice president of global men’s design. Together, they have revamped the merchandise offered under the Nautica label. For spring, the brand’s signature outerwear has been updated with new fabrics, shapes and colors. Polo shirts now have button-down collars, peacoats have contrast linings, jeans are offered in Japanese selvage and there are joggers with nylon waistbands.
“It’s now more sophisticated,” Murray said, adding that the design is expected to appeal to the style captains.
“Before, we talked about demographics, not what was important to this consumer. But now we know that style and feeling comfortable and appropriate trumps water and performance,”she stated.
She conceded that other brands such as Paul & Shark, Vineyard Vines, Tommy Bahama and even Polo Ralph Lauren offer nautically inspired merchandise, but said Nautica’s niche will be to offer a “more sophisticated edge and something that will be appropriate seven days a week.”
Big logos and in-your-face references such as “anchors hanging from zippers” are gone in favor of more subtle cues. The color palette has also been updated to offer more black and tan for a “dressier edge,” she said, and the brand’s former focus on shorts, knitwear and T-shirts has been shifted to concentrate more on wovens, sweaters, sport coats, pants and completer pieces.
Nautica will now focus on a good, better, best strategy. The “good” product range will be sold at the company’s outlets as well as discounters such as TJ Maxx and Burlington Coat Factory. The “better” merchandise will be offered at the department store level at Macy’s, Belk, Lord & Taylor and Dillard’s, where the label is making a return after eight years for spring. The highest-priced product will be sold at its e-commerce sites, international stores and the full-price stores it plans on opening in the U.S. starting next year.
The three tiers are differentiated through trim, details, fabrics and labeling. A shirt, for example, will be constructed from 40s cottons in the “good” category, 60s cottons in “better” and 80s two-ply cottons in “best.”
Prices are different, too, with “better” merchandise selling for 25 percent more than “good” and “best” double that of “better.” The fit of the “best” line is also updated, with a slimmer silhouette rather than Nautica’s signature fuller cut.
Given the size of the company — and its entrenched image as a promotional brand — Murray acknowledged that changing the perception in the U.S. is going to be an uphill battle.
Overseas, the brand is viewed as high quality and aspirational, she said, but in the U.S. “we’re viewed through the eyes of Macy’s” with its dependence on promotions and coupons.
“We will now have a voice in how Macy’s presents the brand,” Murray said, “and it’ll be a lot more sophisticated. Everything we’re doing is about elevation and making sure what we do in the U.S. lifts the brand in its totality.”
Jeff Gennette, president of Macy’s, said he respects VF for its “unwavering focus on consumer insights.”
“I was excited to learn that Nautica executed a rigorous process to better refine their strategy through a customer lens,” he said. “The Macy’s team has started to see the repositioning take hold, and we are testing new buying and merchandising methods with Nautica due to our excitement about the future of the business.”
According to Steve Rendle, president and chief operating officer of VF Corp., talking to and learning from the customer is key.
“At VF, we take a disciplined approach to obtaining consumer insights that are central to our ability to build winning brand strategies,” he stated. “Our team at Nautica has completed an extensive process where they have taken the knowledge learned from their consumer ethnography study and applied it to an evolved set of strategic choices and prioritized actions. We are incredibly excited to begin introducing Nautica’s new brand strategy in 2016, a year that will mark an exciting rebirth for the brand.”
A big step in Nautica’s repositioning will come next month when it opens a pop-up store in the Flatiron district of New York City that will carry both men’s and women’s wear — marking the reintroduction of women’s wear in the U.S. — along with other nautical-inspired items such as sea salt soap and salty black licorice.
In terms of apparel, there will be slim-fit quilted coats with wool melton details and heavy-gauge cashmere sweaters. Nautical stripes have been reinvented and peacoats have been reinterpreted to look more urban. There will be 45 sku’s in men’s and 30 in women’s.
Nautica is also offering other VF-owned brands in the store including Seven For All Mankind jeans, Timberland boots and Splendid T-shirts.
The pop-up will be followed in the second quarter of 2016 with the opening of the brand’s first full-price store in Miami Beach, a huge market for the label, Murray said. Depending upon the performance of that store, Nautica is prepared to add additional units. “The corporation is very supportive of direct-to-consumer initiatives,” she said.
This revamping and the three-tier product offering has gotten the blessing of VF’s top management, who were initially skeptical that consumers will pay $89.50 for a supima cotton polo with a cut-and-sewn collar and pearl buttons at a Nautica store instead of $59.99 for polo at Macy’s or $29.99 at an outlet.
Add to that Nautica’s previous attempt to carve a niche in the high-end market with its Black Sail collection that has now been discontinued.
But Murray believes that the brand this time will succeed in jump-starting its growth in the U.S. by creating stores with an updated, upscale design filled with merchandise expected to target the “style captains” who have “no problem spending money to look pulled together and fashionable.”
So what’s the ultimate goal for Nautica in the future? “VF loves $1 billion and $2 billion brands,” Murray said. “We have a few now: Vans, Timberland and The North Face and they would consider investing in Nautica to get there, too.”