Chico’s is launching initiatives to get the brand back on track with Wall Street and entice the retailer’s Baby Boomer customers, who are being courted by more specialty rivals than ever.
The company said Wednesday that it will organize its three brands — Chico’s, White House|Black Market and Soma — under individual brand presidents for the first time.
The changes reflect a broad strategy of updating apparel offerings, especially in the Chico’s division. President and chief executive officer Scott Edmonds reiterated that the retailer made “fashion missteps” during the second half of 2006 after years of same-store sales gains.
Stressing that “the business is not broken,” Edmonds said in an interview that the initiatives were not a major overhaul, but an effort to improve product direction, efficiency and build brands. “We do tremendous volume, and we’re running 93 percent of where we need to be,” he said.
The company will close the Fitiques division, acquired in January 2006. The 12-store vertical high-end sportswear operation, based in Scottsdale, Ariz., was never successfully developed under the Chico’s umbrella.
Edmonds said these initiatives would show results in the second half of this year. He said clearly defining product and bringing newness to consumers was the key.
“We got too predictive with our product,” he said. “We owned this customer for nine years and led the sector. Recently, competitors began copying our frequent shopper programs, in-store service programs, catalogues and finally our merchandise. We didn’t move fast enough and didn’t bring the level of newness up.”
For the fourth quarter ending Feb. 3, Chico’s earnings fell to $18.2 million, or 10 cents a diluted share, from $44.5 million, or 24 cents, in the year-ago period. The results include a tax expense of $8.6 million, or about 3 cents a diluted share, related to the Fitiques closing. Sales increased 18.8 percent to $446.3 million from $375.7 million, while total same-store sales fell 2 percent for the quarter. For the full fiscal year, net income dropped 14 percent to $166.6 million, or 93 cents a diluted share, from $193.9 million, or $1.06 a share, in the prior year, while sales increased 17.2 percent to $1.65 billion from $1.4 billion.
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“Chico’s had a strong point of view for a long time, but over the last year, it has become less articulated and not as exciting or differentiated as it was,” said Catherine Sadler, president of Catherine Sadler Group, a New York brand marketing company. “With more competition now, they need focus with their core consumer. The appointment of brand presidents…is a positive.”
Edmonds promoted Michele Cloutier, who joined the company in September as executive vice president/general merchandise manager, was named executive vice president/chief merchandising officer. Cloutier replaces Pat Murphy Kerstein, who will serve out her contract through 2011 as a consultant. Cloutier will supervise merchandising, product development and production to improve fashion direction and production efficiency.
Patricia Darrow Smith, a founder of White House|Black Market, was promoted to brand president, overseeing the creative vision of the brand, encompassing creative, merchandising, visuals, marketing and store design.
“Like Mickey Drexler is J. Crew, these brand presidents will stand for the brand,” Edmonds said, referring to the J. Crew ceo. He declined to speculate on presidents of Chico’s and Soma, but said the transition would take as long as 18 months.
The Fort Myers, Fla.-based company has 925 women’s specialty stores in 47 states, including 558 frontline Chico’s stores, 34 Chico’s outlet stores, 257 White House|Black Market frontline stores, 16 White House|Black Market outlet stores and 51 Soma by Chico’s stores.