rue21 looks for the sweet spot


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The months of road shows with investors are over and the conference calls with analysts done for the foreseeable future. It was sometimes a bumpy process, but Cranberry-based teen clothing retailer rue21 returned to the ranks of private companies in October after being sold for about $1.1 billion.

Now CEO Bob Fisch would rather talk about the fun part of being in the retail business.

"I feel like I'm starting over again," he said earnestly as he walked around the remodeled rue21 store at the Tanger Outlets in South Strabane last week pointing out the fixtures filled with colorful nail polishes, walls covered with boots and more boots, and, especially, the new section devoting more attention to the guys.

A day later, rue21 would open its 1,000th store, complete with the rueGuy format that will be part of any new locations going forward.

A week earlier, the retailer launched its first online shop, opening up its trendy, inexpensive fashion to even more places than its hundreds of storefronts around the country.

"I'm really looking forward to 2014," Mr. Fisch said.

The teen clothing sector has not had its strongest year, with big names such as New Albany, Ohio-based Abercrombie & Fitch and South Side-based American Eagle Outfitters reporting disappointing sales. That made some investors skittish about rue21's prospects, especially after the Cranberry chain reported drops in year-over-year comparisons at established stores.

"Yes, we had a tough second quarter," Mr. Fisch said, adding, "It's the first time in 45 quarters that we missed."

He said London-based Apax Partners, the private equity investor that bought rue21 and had been an investor in the chain before, never showed any inclination to pull out of the deal, and any doubters at the road shows seemed reassured after he shared his vision for the company.

"I am totally committed to building this business," he said, predicting that rue21 could grow to become a $2 billion business. In the fiscal year ending in February, rue21 reported sales just above $900 million.

Getting there will require the discipline to stay focused on the long term, even as the company's merchants work to respond quickly to short-term fashion hits.

Which brings Mr. Fisch to the subject of rue21's long anticipated e-commerce launch, which analysts and customers had been pressing for as competitors made it increasingly clear that shoppers were willing to buy fashion online.

Taking a deliberative approach was the right approach, he said. "It was by design for a couple of reasons."

For one thing, rue21 was busy establishing its fast-growing bricks-and-mortar chain, raising its profile around the country. Since its niche is providing accessible fashion in underserved markets, it's still off the radar for many customers in major markets.

Store No. 1,000 opened Thursday in the Oklahoma city of Enid, which the local visitors bureau claims is where evangelist Oral Roberts found his calling and also where a character in the TV series "The Big Bang Theory" briefly considered moving for its low crime and high-speed Internet. The county's economic development site says the population is over 50,000.

Communities between 15,000 and 50,000 people are in rue21's sweet spot, Mr. Fisch said. "There's plenty of those in the U.S.," meaning there's plenty of room to open more stores.

The delay in going online also had to do with getting the supporting infrastructure in place, including doubling the size of rue21's distribution center in Weirton, W.Va., and recruiting talent experienced in online retail. The company considered outsourcing online order fulfillment but decided keeping it in-house made more sense economically.

The plan did originally call for turning on the e-commerce operation next year but Mr. Fisch said he decided it needed to be in place for this holiday season. Still, rue21's delayed arrival to the online party had the advantage of making it easier to make the e-store accessible for mobile commerce, in addition to more traditional desktop computers.

The retailer's other big initiative this year has been rueGuy, which puts a name on the section of the stores devoted to guys along with expanding the merchandise offerings. The guys business has traditionally accounted for between 18 percent and 20 percent of the company's sales, but stores where the new format has been tested since August are seeing as much as 23 percent of sales coming from men's fashion.

Besides the usual mix of jeans and T-shirts, rue21 has been adding colognes and underwear and expects to add more footwear. The new stores -- and remodeled ones -- provide a little more separation for the girls, too, who seem to like having their jewelry selections taken off the walls and put onto tables and freestanding displays. They like the separate dressing room entrances, too.

The remodeling freshens things up, which could help address rue21's ongoing challenge to keep sales growing in established stores. "I think customers just wanted to see things differently," Mr. Fisch said, as he pointed out walls that have been put to extensive use as merchandise displays and an open ceiling that makes the 5,500-square-foot store feel larger.

More changes are coming, including rue21's first swimwear line in the spring.

Mr. Fisch said it can be easier taking such chances as a private company that is not trying to produce quarterly gains to make Wall Street happy. "It's easy as a public company to get away from your DNA," he said.


Teresa F. Lindeman: tlindeman@post-gazette.com or 412-263-2018.

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