Why Charlotte Russe's Management Makeover is the Ticket to Smart Growth
How does a management team take a mediocre mall store and up the fashion quotient without pulling down profits? In the case of young women's apparel retailer Charlotte Russe, it began with going private and getting a top-down makeover.
The overall effect is startling, not unlike to the transformation of a gawky teen who ditches braces and glasses in favor of a blow out and chic threads. But even with the opening of slick new stores and the launch of a stylish Web site, the fast fashion chain still has work to do.
San Diego-based Charlotte Russe was founded in 1975 â€" well before its major competitor, the fast fashion mega-chain Forever 21. Growing rapidly in Southern California, Charlotte Russe's 35-store chain went from a privately held enterprise ringing in annual sales of $70 million in the first 20 years, to going public, then growing to $900 million in revenue and 500 stores in 2008.
Yet all that expansion was about as healthy as a bloated waistline. Too many aggressive real estate grabs resulted in an abundance of oversized stores. Add sub-par locations with high rent during a flagging economy and it's no wonder the company's investors were crying foul. Even though Charlotte Ruse shuttered its failing Rampage stores in 2006, a hostile takeover battle ensued.
But investors were less pleased with the lowball offer from investment company Karp & Reilly and managed to deflect the bid in favor of one from Advent International Corp., a $24 billion investment group that has a stake in successful activewear chain Lululemon Athletica.
In short order, the now-private company was able to make sweeping changes without having to wait for board approval. Installing Jenny Ming as CEO was first order of business. Ming, former president of Gap's (GPS) Old Navy from 1998 to 2006 (and an operating partner of Advent), moved all the creative to San Francisco to take advantage of the local talent for its newly-formed in-house design team.
And rather than signing off on sweeping spending cuts, Ming convinced the team to take a smart step toward investing in improving the retail experience. She addressed the stores' often chaotic merchandising by streamlining displays and improving lighting and fixtures. The same effort was duplicated virtually in Charlotte Russe's spare and sleek e-commerce site.
That's a lot of moving parts to tackle in short order, but Ming and company appear to be faring well so far. What remains to be seen is how Charlotte Russe's new look will convince shoppers that the goods aren't cheaply made â€" especially as the prices rise to reflect Ming's attention to costly details such as better buttons. Mindset makeovers take time. The good news is that by helming a private company, Ming can take plenty of risks.
Image via CharlotteRusse.com
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