The $3.5 billion Belk Inc. wants to flaunt the hipper, modern side of its southern charm.
“We are investing in our business in a big way and updating our image,” Tim Belk, chairman and chief executive officer of the nation’s largest private department store group, told WWD. “Branding will be a big deal. We don’t want to leave any customers behind. We are focusing the message and trying to make a more emotional connection with our customers.”
It’s a matter of shifting priorities — and investing tens of millions in a new look. “The focus in the next two to three years will be on organic growth, getting our stores to be more productive,” Belk said. “If you look a little further than that, you will see new store growth in the next two or three years.”
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That’s a change from the acquisition spree the department store group went on from 2002 to 2007, when Belk bought Proffitt’s, McRae’s and Parisian, boosted its revenues by $1 billion and spread its regional dominance to Tennessee, Mississippi and Alabama. The company also subsequently purchased Migerobe Inc. to establish a fine jewelry division.
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While it’s long excelled in cosmetics, the Charlotte, N.C.-based chain that operates 305 stores in 16 states seeks a better balance by pumping up a host of categories — shoes, jewelry and denim among them — that have lagged the times. Belk also has stepped up investments in remodels, store expansions and information technology and has increased its merchandising and planning staff. Last year, the company launched e-commerce.
“We came through the recession well, learned a lot of lessons, but we are in a position to invest. We’ve got cash on the balance sheet and will put that to work,” Belk said. Belk ended last year with more than $500 million in cash.
In an environment of slow growth, “It means taking market share. That is very hard.”
To flag all the changes and those upcoming, Belk next week will unveil a slicker blue logo with store signs, shopping bags and charge cards brandishing the look.
“Belk has transformed,” the executive said. “While we are not walking away from the traditional customers, newer customers coming to shop our stores are looking for a more modern, trendier assortment. We want to signal through this brand message that we have modern assortments, and given our heritage has a southern flair to it, want to exploit that and make sure people understand that’s where we are.”
Among the changes:
• A new graphics package to refresh the company’s visual identity, including a contemporary corporate logo, color palette and the tag line “Modern. Southern. Style.” It’s the first significant change in brand identity since 1967.
• Significant investment in store remodelings. “They take several forms, from major renovations to departments getting new concepts,” Belk said. “We are looking at 60 over three years that will be full remodels, and a larger number of department remodels.”
• Denim areas in 200 stores have been renamed “denim destination” and overhauled with new fixturing. The remaining 100 stores in the chain get the denim makeover in the spring.
• Shoe departments have expanded in 60 stores and over the next three to four years the expansion should be chainwide. Expanded departments represent 9.5 percent of the square footage of the stores, up from 6.5 percent.
• A new costume jewelry format being piloted in 26 stores will be rolled out next year. According to Belk, the emphasis is on flexibility in merchandise presentation to better show off trends, colors and classifications.
In the new departments, “We can show a color presentation, a vendor presentation or a classification presentation, like big rings or statement necklaces. There’s also more open-sell. The fixturing holds a lot more units per square foot.”
Belk is spending about $70 million on branding over the next 18 months, including $25 million on installing signs with the new logos, representing an $18 million increase. Sixty stores will be re-signed by Christmas, with the balance expected to be installed by November 2011. The official launch of the campaign is Oct. 10.
“This rebranding is about updating our image and trying to tell our story in a more focused way,” Belk said. “It’s more than just a logo change. It’s really how we do business, how we connect with our customer and how we move forward to compete well and really resonate with our customer and differentiate with the national competitors on our horizon and in our backyard.
“Our core strength is cosmetics. If I had to name one area, I’d say we would like to elevate shoes to a similar position in our stores. That’s why we are expanding the space. For last year and this year, shoes is our fastest-growing business — double digits — and we have a very strong base in classic,” though the fastest growth is with modern lifestyle brands. Key labels include BCBG Max Azria, Jessica Simpson, Uggs, Lucky, Steve Madden, Nine West, Kensie Girl, Frye and Rampage.
With all the updating, however, Belk said it’s important not to neglect the classic, traditional side. “I don’t want to send a signal that we’re not growing in that, too. Polo Ralph Lauren is showing strong growth.”
Regional chains face an uphill battle against major national retailers. But Belk, and his president and chief merchandising officer, Kathryn Bufano, cited advantages. “We have a very strong presence in the South and the number of stores we have in a given state certainly gets the attention from our vendor community,” said Belk. The chain covers major metro markets, and secondary and tertiary markets. “Secondly, we know our markets very well. We are able to penetrate them well, and yes we do fight the challenge of exclusives and distributions, but to some degree everybody fights that battle,” he added.
“Down here, the tulips are blooming and there is a spring as opposed to hoping for spring. So we sell color all year,” said Bufano. “Lightweight is important all year. The women are very feminine and girly. They like to be dressed up and like to have their faces put together. When they go out, they like people to say that they are pretty. They wear dresses to football games. They are social events. They wear dresses to the beach.”
While having difficulty getting the big brand exclusives that chains such as Macy’s and J.C. Penney get, Belk has advanced its private label business relatively faster than the competition and it now represents 30 percent of sales, from less than 10 percent nine years ago. Macy’s is around 20 percent, and other department stores are typically half that. Only Penney’s would have a higher penetration, at about 50 percent of its fashion.
Key private brands include Columbia in men’s; Madison in better men’s and women’s; Kim Rogers for moderate women’s; Saddlebred for men’s moderate; New Directions in moderate and modern women’s, and Red Camel boys’ and girls’.
As for national brands, Belk cites Estée Lauder, Clinique, Lancôme, Jones New York, Polo Ralph Lauren, Calvin Klein, Nautica, Izod, Lee, Levi’s, Nike, Reebok, Bali and Sophie Max by Leon Max as among its key ones. Examples of Belk’s premium brand offerings in select markets include cosmetics by Chanel, MAC, Bobbi Brown, Laura Mercier, Benefit and Kiehl’s; fashion apparel by St. John, Lauren by Ralph Lauren, Theory, Lilly Pulitzer, Marc by Marc Jacobs, Seven For All Mankind, Lucky Brand Dungarees, Free People, Citizens of Humanity and Wacoal, and handbags, accessories and shoes by Brahmin, Brighton, Coach, Donald J Pliner and Dooney & Bourke.
Belk sees volume growing from $3.3 billion in 2009 to $3.5 billion at the end of 2010. Prior to the recession, the chain generated $3.8 billion in revenues. The retail executive said he wouldn’t rule out another acquisition, but added, “We are not looking to acquire. I don’t see anything in the near term.”
Hence the need for organic growth. Said Johnny Belk, president and chief operating officer: “We’ve been working hard in recent years to establish Belk as the brand leader, not only in cosmetics, but also in dresses, shoes, costume jewelry, accessories and denim. We felt the time was right to expand our profile and realign our corporate image to better reflect the kind of stores we operate today. Rebranding happens only once in a generation, and our recent strong financial performance and balance sheet have enabled us to make significant investments.”