Comfy clothes in the pandemic provide retailer a sales boost

Chico's FAS, proving anytime is a good time to embrace change, utilizes unusual time to rebrand, rethink and refocus some campaigns.

By Mark Gordon
| 9:10 a.m. September 9, 2020
| 2 Free Articles Remaining!

Chico's FAS Kimberly Grabel says during the pandemic the company had to "think differently, get resourceful and work in new ways."

Strategies

Giant corporations aren’t known for being nimble and making adjustments on the fly.

Clothes closed

Chico’s FAS has been scaling down its portfolio of stores for several years — mostly a response to customer shifts to e-commerce. The pandemic has accelerated that effort.

The Fort Myers-based women’s retailer recently hired A&G Real Estate Partners to help assess its real estate portfolio, what CEO Molly Langenstein, in an earnings call, terms “an arduous process.” The company, in the Aug. 26 earnings call, reports several developments, including:

• Restructuring its lease portfolio, which led to rent abatements for fiscal 2020 and savings into the “eight figures,” interim CFO David Oliver says;

• Temporarily suspending rent payments for stores closed in the second quarter and negotiating other rent payments as stores reopened; and

• Closing 19 stores in the second quarter, bringing year-to-date closings to 28. Officials anticipate permanently closing an additional 25 to 50 stores.

“We know there will be some store shrink in the coming year,” Langenstein says in the call, “as we are holding our stores to higher profitability standards, either through increased sales per square foot or lower rent.”

Fort Myers based women’s retailer Chico’s FAS, with $2.03 billion in revenue in 2019 and 1,313 locations across North America, is a notable exception. The company recently made a series of changes in all three of its brands — Chico’s, White House Black Market and Soma. From new campaigns to revamped logos, the initiatives mostly took place over the past three to four months, Chico’s FAS Senior Vice President of Marketing Kimberly Grabel says. “We were very quick to adapt in the pandemic,” Grabel says. “There are a lot of stores that spent the pandemic figuring out how to stay open. We spent the pandemic figuring out how to reshape our brands.”

Combined with companywide cost-cutting, including examining all its brick-and-mortar leases, the changes, company executives add, could provide a big boost going to in the holiday season.

Chico’s FAS President and CEO Molly Langenstein, in an Aug. 26 earnings call with Wall Street analysts, acknowledged the havoc wrought by the pandemic and the company’s ability to react to it quickly. “We are taking advantage of this unprecedented period to be flexible and to stay laser-focused,” Langenstein says. “We have streamlined the organization, reduced expenses, reengineered our supply chain and accelerated technology initiatives.”

Those steps started paying dividends in the second quarter. Gross margins are up some 18%, according to the company’s second quarter earnings release, while inventory levels were reduced in the second quarter by nearly 14%. Combined digital and store sales, meanwhile, increased 9.2% in the second quarter over the first quarter — despite stores effectively being closed the same number of weeks in the second quarter as the first.

Even more positive: Digital sales in apparel and intimates each grew double digits, with Soma, its intimates brand, leading the way with a 70% rise in digital sales over the 2019 second quarter. “Business [at Soma] has been incredibly strong,” Grabel says in an interview, citing work from a home wardrobe requirements. “It’s been explosive. Sleepwear has been what people where to work, what people wear at night and what people wear on the weekends.”

‘There are a lot of stores that spent the pandemic figuring out how to stay open. We spent the pandemic figuring out how to reshape our brands.’ Kimberly Grabel, Chico’s FAS

In focusing on staying ahead of customer trends, some of the recent changes within individual company units include:

• Soma: A brand refresh, new logo and multiple new product launches. Soma WKND, the brand’s new modern loungewear collection, consists of multiple fabrications that are “extremely soft and lightweight,” according to a statement. Soma WKND also includes styles with sustainable eco-yarn composed of soft recycled yarns made from plastic bottles. “We wanted to put a fresh feeling to the brand,” Grabel says of Soma, which is 16 years old. “We’ve been pretty functional with Soma in the past. We wanted this to be a more emotional touch.”

• White House Black Market: The company shaped its fall 2020 campaign around social distancing protocols — and some creative virtual thinking. To do that, it shipped its fall collection to the south shore of Long Island, N.Y., where a fashion photographer took the pictures with his model-wife. Grabel and her team directed the shoot through What'sApp from their Southwest Florida home offices. “We had to think differently, get resourceful and work in new ways,” Grabel says.

Courtesy. Pictures for the White House Black Market fall 2020 campaign were taken on Long Island, N.Y.

• Chico’s: New elements of the company’s flagship brand are seen through The Art of Chic campaign, which, according to a statement, “is a more fashion-forward approach that is true to its boutique heritage,” going back to the company’s founding in 1983 on Sanibel Island. The campaign includes an enhanced logo — with an emphasis on the chic in Chico’s. “Our customer is at the core of everything we do,” Grabel says. “We are responding to her wardrobe needs by enabling her to look chic and unique, regardless of her personality or destination.”