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Women shoppers who walk through Talbots' (TLB
) signature red door know what to expect on the racks: classic suits to wear to the office, elegant dresses for a dinner party, and cashmere sweaters for the weekend. As more and more busy women started to view shopping as a chore, Talbots' dependable offerings have made filling the wardrobe easy for the less-than-fashion-obsessed. And Talbots' many loyal fans are willing to pay full price for wardrobe basics.
The formula seems to work: Over the years, the Hingham (Mass.) company has achieved steady if unspectacular growth vs. other mall-based apparel retailers by developing new stores that focus on various segments of retail.
Now comes a riskier gambit: This fall Talbots will try to stretch the brand still further by starting a men's sportswear business. The retailer will launch a small catalog for an assortment of its men's clothes in October and then open three retail stores early in 2003. Analysts expect the men's stores to generate significant sales over time, eventually totalling at least a quarter of the total store base (now 800).
A LIMITED FLOP. Other women's clothiers before Talbots have ventured into selling men's apparel -- with mixed results. It's always iffy whether men can be persuaded to go for a label that's strongly identified with women. In the early 1990s, The Limited Brands (LTD
) initially had some success with its men's Structure stores, then had to regroup after years of flagging sales. This summer, it's relaunching the men's chain as Express Men's, which aims to be sleeker and more urban-looking, much like the company's Express chain for women. Stores will start opening under the new brand this summer.
Others, such as higher-end designer brands Donna Karan and Liz Claiborne made the transition successfully. Eddie Bauer and Brooks Brothers, both geared toward men, have also become known for their women's clothes. In all of these cases, the success wasn't instant. Older and more affluent customers typically take time to adopt something unfamiliar. "Making men move away from competitors will be the big risk [for Talbots], especially since they're a group of shoppers that tends to be more apathetic about clothes," notes says Dan Stanek, executive vice-president at Retail Forward, an industry consultant.
Investors also might be wondering why a retailer would expand into a totally new concept with consumer spending showing signs of softness, especially since Talbots' financial performance and stock price are somewhat threadbare these days. At $29, the shares are well off the 52-week high of $44. Since January, the stock has dropped 22%, while Dow Jones apparel retailers' index is down just 9%.
SLOWER GROWTH? "We do look at the economy, and we think it has had some effect on us. But we're hopeful that it will turn a bit for the second half of the year. And that will be a help," says Talbots' CEO Arnold Zetcher.
For the short term, analysts see the menswear move as an unprofitable investment for a company that's already struggling to keep earnings on track. In the fiscal year ended Feb. 2, 2002, Talbots' earnings climbed 10%, to $127 million, on sales that were up about 1%, to $1.6 billion. It expects to show earnings growth for the remainder of the year, but less than investors have become accustomed to.
"This year the consensus EPS is $2.20, which would indicate a 10% rise from last year," Zetcher says. "That's less than the historical average but not bad in this kind of economy. We're weathering this, and we'll be all set for 2003."
PLUS-SIZE SUCCESS. Over the long haul, however, most retail experts are bullish on the new strategy. Talbots has a solid record of starting new concepts without alienating core customers, for one thing. Since it went public in 1993, it has successfully opened separate stores for children's clothes, shoes and accessories, petite-size women, and most recently plus-size women.
The success of the latter since they opened in 1998 is something Talbots would clearly like to repeat. It has already opened nearly 60 of the plus-size stores and plans to add an additional 23 to 26 this year. Moreover, it now generates substantial sales from its Web site and catalog, and hopes to increase its total stores from the current 800 to 1,100 -- not including the men's outlets -- by 2005.
Other factors are working in Talbots' favor, too. Its customers tend to be more loyal and upscale than most. Even more important, women still account for more than half the purchasers of men's clothes. Talbots' new offerings will include jackets, pants, shirts, and sweaters that cater to the male counterpart of the store's typical shopper: Suburban women between 35 and 55 years old, married, college-educated, and professional. Talbots "has a unique opportunity" to sell to men via its current customers, contends Marshal Cohen, co-president of NPDFashionworld, a market research company.
DRESSIER DUDS. Shifting consumer tastes could also help Talbots. Casual sportswear accounted for 70% of the $50.9 billion worth of men's apparel last year, vs. 30% for dressier clothes. But the latter are coming back into fashion. NPDFashionworld's market data indicate that for the next several years, the biggest growth in men's clothing will come from more tailored, career-oriented clothes. This category is expected to grow 6% in 2002, while casual clothes will break even. Plus, the main competition here is stodgy department stores. Only a few nimble stand-alone chains will be competing directly.
Yes, some of the more spectacular stumbles in retailing have been caused by companies chasing an attractive demographic without understanding it. But Talbots' move may be less risky than, say, the failed attempts by department stores in recent years to appeal to fickle teens. It's likely the most attractive avenue for new growth Talbots has in front of it. The keys may be how many loyal Talbot women can lure their men into the stores with them, and how soon.
Copyright 2002, by The McGraw-Hill Companies Inc. All rights reserved.
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