Mid-Market All Stars '08

By Debby Garbato and Christine Zarrello — April 15, 2008

2007 was not a banner year for retail. Many companies downsized and news reports were filled with stories of poor sales and slow traffic. Despite these odds, some mid-size chains were ingenious enough to enact winning formulas. Their sales and profits increased and successful new categories and selling formats were layered on to strong base businesses.

These are companies that consistently do their homework. Through hard work, solid business strategies and aggressive use of cutting edge technologies, they know exactly who their customers are, what they are willing to buy and how. Each of the 10 retailers honored in RIS News' Mid-Market All Stars recorded growth in the 10 percent range or beyond during the past 12 months. Corporate sales ranged from about $200 million to $1 billion.

Lindt USA
--USA Sales: $195 million (2006)
--Growth: +10%

Lindt's growth in the U.S. stems from more than consumers' recognition of dark chocolate's antioxidant benefits. The Zurich-based company, which faces stiff competition in North America, now occupies the number four position among U.S. chocolate suppliers. Every year for the past five years, Lindt has experienced double digit growth in the U.S.

Lindt continually unveils new merchandise. Many items are geared around seasonal occasions. Chocolate is sold via Lindt's stores, other retailers and through Lindt's Web site. Success, says Ed Leduke, system analyst for business intelligence at Lindt, has been driven largely by the company's ability to accurately monitor sales in real time across all areas.

By using products from IBM and Cognos, store and district managers can view the previous day's sales at the start of the day. Before, information was not received until mid-day and was often incomplete and not as accurate. Wholesale reps can look at item movement data via the Web and conduct "self-service" analysis, says Leduke. Lindt USA also uses Cognos to determine stock vulnerability. This allows Lindt to better plan its manufacturing. "Today, Lindt USA is a proactive company that relies on a single set of performance information to make business decisions for its retail, wholesale and manufacturing operations," adds Leduke.

Build-A-Bear
--Sales: $474 million
--Growth: 9%

When Build-A-Bear Workshop launched its first store in Saint Louis in 1997, retail/entertainment venues were cropping up everywhere. While experts marveled at this interactive concept that let consumers "assemble" their own Teddy bears, some questioned growth prospects and staying power.

But Build-A-Bear seems to have the same timeless value as the Teddy bear itself. The company's highly interactive stores and Web site continually feature new twists on this grizzly, time-honored theme. The retailer has even partnered with Limited Too and Sketchers to properly outfit the furry critters. And it runs strong promotions. Two years ago, it launched Build-A-Bear Workshop On Tour to take its bears beyond the mall.

The company's Web site is an ever-changing marvel of click-on animation. A feature launched in December, bsuildabearville.com, brings bears to life online. "Guests enjoy extending the Build-A-Bear experience by bringing the furry friends they made in stores to life on line," says Dave Finnegan, chief technology officer.

Steve & Barry's
--Sales: $600 million (estimated)
--Growth: 50 percent (estimated)

Apparel retailer Steve & Barry's is literally taking over the malls of America. From 2006 to 2007, the company, which prices everything at $20 or less, grew its store count 58 percent. Growth also came from the addition of women's and children's categories, which include celebrity-endorsed clothing lines. Offerings now include Sarah Jessica Parker's Bitten sportswear and Venus Williams' EleVen.

From an IT perspective, all these SKUs and stores mean Steve & Barry's must manage a wide range of products across a vast overseas sourcing network and store real estate base. In 2007, Steve & Barry's announced it was replacing proprietary software with a comprehensive SAP package. New software will allow the retailer to better manage pricing, examine historical sales and market demographics and line ordering and replenishment data to its warehouse.

"With SAP, we look to dramatically improve visibility across our enterprise, empower employees to make more informed decisions and, ultimately, to find new ways to more efficiently and cost effectively respond to customers' needs," says COO Gary Sugarman. Michael Beller, CIO, adds that, as an end-to-end integrated solution, SAP is a "cornerstone" of the retailer's overall business strategy.

Steve & Barry's is also looking at the longer term advantages of SAP. Already, executives envision using SAP to improve how the retailer ships and tracks products, all of which are produced by factories that are largely in African countries. They are also exploring online merchandise selling.

As far as new stores, the company says there are "hundreds more" in the pipeline. It often strikes aggressive rent deals with landlords that have lost anchor tenants.

The Container Store
--Sales: $600+ million
--Growth: +15%

The Container Store literally created the home storage and organization specialty category. While other retailers have emulated some of its product segments, nobody can match the retailer's depth of selection, customer service and hands-on knowledge of every aspect of business.

Many product and business solutions are developed from scratch to meet the retailer's unique customer service needs. Others come from well-known vendors like Oracle and Kronos.

"The Container Store can successfully engage customers with custom solutions that transcend expectations," says Tom Birmingham, VP and chief technology officer. "Our customer data base accelerates insight into new product developments. And our new plan-o-gram (AVT) and demand-based replenishment system allows us to optimize our customers' on-going inventory service level."

Jos A. Bank
--Sales: $604 million
--Growth: 10.5% (FY 2007)

Century-old Jos A. Bank has never called in sick on casual Friday. While other menswear retailers have struggled with the khakis/golf shirt trend, Jos A. Bank has successfully integrated men's casual apparel into its tailored clothing mix.

Much of the growth has taken place online. Jos. A. Bank selected DoubleClick Performics to gain high profile visibility on home or category pages. Offline promotions were leveraged to drive affiliate channel sales by providing Web shoppers with exclusive offers. Affiliate marketing sales have grown about 40 percent annually since 2001. "We wanted a program that would engage consumers, expand our online presence and drive long-term growth," noted Pete Zophy, divisional vice president of e-commerce for the 324-store chain.

Sport Chalet
--Sales: $388 million
--Growth: 13%

Sport Chalet, an athletic apparel and equipment chain, credits its steady sales growth to ongoing store expansion as well as in-store and back-end technology implementations.

In 2007, Sport Chalet introduced a CRM program called Action Pass. This tool helps it learn more about cross-shopping patterns and brand loyalty. A new HighJump warehouse management system should improve distribution. The company also launched a new Web site and installed a SAS inventory management system and an SAP merchandising and financial product.

"We continue to prudently manage our business, making important investments that will position the company for long-term sales and earnings growth," says Craig Levra, chairman and CEO. "We have been successful with significant IT initiatives, including our SAP installation and rollout of enterprise selling to all stores."

Tween Brands
--Sales: $970 million
--Growth: 13%

Tween Brands is all about butterflies, pink flowers and girls aged 7 to 14. While the company has been aggressively marketing its Limited Too chain (a mall concept) and Justice (a new, off-mall specialty brand), changes to the company's Web site have upped e-commerce productivity by 25 percent. Tween Brands Inc. achieved more than 99.9 percent accuracy in order fulfillment.

Tween brands upgraded its e-commerce business with Dematic's Put-to-Light fulfillment system and Manhattan Associates' Warehouse Management solution. The 2007 project was completed on schedule and under budget. "We succeeded by first defining what we wanted to get from the implementation and then sticking to the plan," says Carol Brouillette, manager of special projects at Tween Brands. "We followed Manhattan Associates' implementation methodology to the letter. The upgrade of the Warehouse Management solution went live and, two weeks later, the Dematic Put-to-Light system went live. There was no negative impact whatsoever on production."

The retailer also operates a catalog. In total, the company runs 573 stores (154 of them are Justice locations). All formats sell casual apparel and lifestyle accessories.

Guess Stores
--Sales: $591 million (N.A., first 9 mos. FY 2008)
--Growth: 19% (N.A., first 9 mos. FY 2008)

Like big hair, many of the designer jeans brands of the 1970s and 1980s quickly flattened. But Guess Stores, which began in 1981, has endured-and prospered-well into the straight hair era. Today, it is an upscale retailer of jeans, other casual apparel and accessories.

In Europe and Asia, it opened 125 stores in 2006 and approximately 107 in 2007. In the U.S., Guess' stores performed ahead of expectations during what was a dismal holiday selling period for many retailers.

Growth has been supported by aggressive development of back end systems for stores as well as e-commerce search, navigation and merchandising functions.
In 2007, Guess introduced a loyalty club at its Marciano branded stores. A Java-based XStore POS system from Datavantage integrates with the club. Guess also is investigating cell phone payment options, particularly in Asia, where this technology is more advanced.

"We are very clean, automated and integrated," says Michael Relich, CIO. "We could double or triple stores, or increase volumes. You aren't going to put much stress on systems."

Over time, Guess executives believe they can double the retailer's store presence across all concepts throughout North America.

Zumiez
--Sales: $255 million (first 9 months 2007)
--Growth: 37% (first 9 months 2007)

Specialty retailer Zumiez has zoomed up the financial scale by zeroing in on young customers with high disposable incomes and time to kill in malls. Apparel, footwear and accessory themes revolve around skateboarding, surfing, snowboarding, BMX and motorcross. When its 12- to 24-year-old shoppers put down their bikes, they can relax on the stores' sofas. Video game stations encourage customers to stay longer and socialize. Zumiez' 235 stores are near the movie complexes, food courts, music and game stores where young adults congregate.

Through strategic site selection, Zumiez believes its lifestyle concept can appeal to roughly three times as many teens as it targets today. In early 2008, Zumiez implemented the Buyer's Toolbox by ANT USA. The software provides store-level need profiling, Dynamic Store Clustering and other planning tools. "We opened 17 stores in Q3 and 48 year-to-date," says Rick Brooks, president and CEO of Zumiez Inc. "In November, we reached our goal of 50 new stores in fiscal 2007. We believe we can eventually operate 800."

Room & Board
--Sales: $200 million (estimated)
--Growth: 15% (estimated)

"We found an operation clearly looking to elbow its way to the table with Crate & Barrel and Restoration Hardware," notes Apartment Therapy, a New York City-directed home decor Web site in its description of furniture retailer Room & Board.

With an annual growth rate of 15 percent and approximately $200 million in sales coming from just nine very strategically located stores and a comprehensive online business, the retailer very well may be close on the heels of these chains. And, like home retailing icon The Container Store, Room & Board's non-commissioned salespeople receive rave reviews from shoppers.

Online, the company carefully outlines a variety of shipping choices-a key concern among furniture buyers. On the product side, the retailer's solid wood, contemporary pieces fill a niche that is upscale but not out of reach. Shoppers can also choose a variety of upholstery options and create custom pieces.

Via a SAP software package, the company is increasing productivity and better communicating with and servicing its customers. Most of the company's classic but contemporary furniture pieces are private label.


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