Casual Male: A Microcosm of the Down-Market Retail World, With a Twist

(MoneyWatch)  The happenings at Casual Male Retail Group, the largest "big and tall" specialty retailer in the country for men, perfectly illustrate what is happening in the overall retail industry right now.

Canton, Mass.-based CMRG, which operates nearly 500 stores across North America, has three chains at three different price points: Rochester Clothing, a high-end concept; Casual Male XL, its regular-priced chain; and Casual Male outlet-discount stores.

Can you guess which concept is performing the worst during the recession?

Just like other luxury stores across the country, Casual Male's Rochester is getting hammered. During its recently-reported fourth quarter, sales at stores open at least a year in the 27-unit Rochester chain plunged 19.5 percent from the same period a year ago. Meanwhile, sales at regular-priced locations fell 7.2 percent, and the outlet segment actually posted a slight increase.

At CMRG, like the rest of the industry, luxury stinks, regular retail suffers and marked-down items prevail.

But what makes the company a little different from other retailers out there is that its price-point diversity gives it options not available to others.

"As Rochester has been struggling, we have reassessed the business model as it exists today," said David Levin, CMRG's president and chief executive officer, during its fourth-quarter earnings call. "We've determined that a full-fledged Rochester Clothing store has limited marketability."

Executives came to the conclusion that Rochester stores are no longer viable in secondary markets.

Instead of just closing down those lagging luxury stores, however, management plans to is to combine them with regular-priced units, creating "hybrid" locations. This year CMRG will shut down five Casual Male XL stores within a mile of five Rochester locations and combine the two concepts. Since the Rochester units are larger, those stores will be rebranded as Casual Males and offer the best-selling items from the luxury brand as well as regular-priced clothes.

And when (or if) the economy settles down, Levin contended, the company could expand this concept to every major metro market.

But CMRG is taking things slow. One analyst during the conference call asked if the retailer should take the hybrid concept system countrywide. Levin responded by saying the company wants to take "baby steps" in this environment. "We don't want to do something that could seriously fail on us."