The Remaking of Casual Male


Everyone talks about listening to the customer. Casual Male is really doing it.

In May 2002, Casual Male was coming out of bankruptcy. At the same time Designs Inc., a Mississippi-based retailer of Levis and Dockers, needed a jump start. "The Levi brand had been really struggling, and that's all we were selling," says David Levin, now president and CEO of Casual Male. That's when Designs Inc. went to auction and snapped up Casual Male as the highest bidder. Since then, the company has been on a roll, moving exclusively into the big-and-tall arena, and expanding that niche through the acquisition of Rochester Big & Tall and more recently, Jared M. In its most recent fiscal year, Casual Male had sales of $421 million and net income of $10.8 million, up from $365 million in sales and just $1.5 million in net income the previous year. (With its profit margin of 2.57 percent, the firm just missed making this year's Apparel Top 50 ranking -- it would have been No. 51.) What's behind the company's increasing growth and profits? Recently, Levin spoke with Apparel about how the company is expanding its private label brands, sourcing direct, segmenting its customer base for more individualized merchandising and marketing and -- oh, changing its name.

QHow has your extensive retail experience, including stints at Mervyn's, Payless Shoes and Revlon, served you well at Casual Male? AWhether it's shoes or cosmetics or big clothing, it's all widgets to me. Retailing is about applying your business principles to whatever commodity you're selling. The most important thing I learned is let the customer tell you what they want, and then build your model around that. At Casual Male, we really work to understand the nuances and challenges of what it's like to be big and tall, the frustrations of shopping for apparel. We've learned that comfort and fit are clearly the most important things in terms of product development. Having the customer's size in stock is critical -- and there are so many sizes. It's difficult for any retailer to manage that number of sizes, but we understand this market. We're a size management business. Big guys want to look like everybody else, and they shouldn't be shortchanged in the area of fashion selection. We want to make our customer feel good about being big and tall, instead of negative. That's what led to our rebranding of the company from Casual Male Big & Tall to Casual Male XL.

QOther than the difficulty of finding clothes, what are some of the challenges or negative connotations associated with being big and tall, and how will the XL logo counteract those? AFocus groups and customer surveys made it clear that people see big and tall as a callout for something that they don't think should be called out. The word "big" is negative. The women's industry figured this out a long time ago. You don't call Charming Shoppes or Avenue or Lane Bryant "plus sizes." Men have similar vanity issues, which have more to do with how they feel other people perceive them than how they perceive themselves. For example, one of our customers told me that after he purchased clothes in our store, he got on the subway with his shopping bag that reads "big & tall," and he covered up the name with his arms. He didn't want people to know he shopped there. That's when the light bulb went off. Combined with what we learned from the focus groups, it became very clear that our customer considers "big and tall" a negative. Add to that, our signage had the words "big & tall" in very big print vs. "Casual Male" which was in small typeface. So we were making it even worse. When we showed the focus group the XL logo, it produced an entirely different attitude. They felt that it was a very positive, masculine, powerful name. There was no "baggage" associated with it. So we took that to heart. In October 2005, we completely converted our stores to Casual Male XL in six test markets. We eliminated "big & tall" in all 62 contact points, including shopping bags, credit cards, gift cards, every direct mail piece, the catalog, etc. Virtually overnight, we saw a big change. Employees loved it; customers felt better. Most importantly, we had a lot of new faces that had never been in Casual Male before.

QDo you expect that the new XL brand will allow you to reach out to additional segments of the marketplace? You carry many national brands. Will you use this opportunity to launch additional private label lines? AWe're targeting guys on the smaller side of large. We have a dominant market share in clothing for 50-inch-plus waist sizes because the options for that group are very limited. But more than half of sales in the $6 billion big-and-tall market come from smaller-waist sizes, such as 42- and 44-inch waists, where our penetration is, quite candidly, fairly weak. Those are the guys we're trying to win over. They can find other options in the traditional retail world, but the options are very limited, and they're not happy shoppers. We're also going after the younger customer, and doing extremely well. If a young guy with a 38-inch waist wants to look like his friends, where does he go? He's going into sweat pants, because his choices have suddenly gone away. Nobody in the big-and-tall market was really addressing the younger guy in fashion, so we created our own proprietary brand called 626 Blue, which parallels the styles of Abercrombie & Fitch, American Eagle, Aeropostale. In August, we're launching another brand, Synergy. It's a contemporary line, very similar to a Kenneth Cole, Claiborne or Calvin Klein sportswear look, at a very affordable price. These join our other private labels, Harper Bay, which is traditional, and George Foreman, which is about comfort and technology.

QAs you build these new lines, what percentage of your sales do you expect your private label product to comprise?
A It's been growing so rapidly. It'll be about 60 percent this fall, and we expect it to grow to around 70 percent. There are certain categories where we don't want to go into private label -- active wear, for example. We've tried that. For that type of product, guys want brands, so we have an exclusive with Reebok for big and tall.

QHow is your growing private label business impacting your sourcing strategy?
A One of our biggest projects of the past several months has been building our direct sourcing. We've been buying from domestic importers, and by going directly to factories -- our agent is Li & Fung -- we're seeing considerable cost savings. We're trying to grow our top line sales, but we're also growing our profitability because our gross margins are improving. Direct sourcing for our fall season will be about 40 percent of our private label, growing to 60 percent direct sourcing for private label in the spring.

QYou are segmenting your clients into nine clusters based on profiles you've developed of your customer base. How are you able to track that activity by cluster, and how do you target your marketing and merchandising strategies to each cluster, without confusing the presentation in your stores and in your marketing message? AThat's probably the biggest challenge we have. We're a size management business. Our No. 1 pant comes in 49 size combinations. The stores sell sizes differently by parts of the country, by ethnicity, etc. We have to get the right size in each store. Our systems now create assortment size curves by classification for each store to maximize sell-through and keep our in-stocks at a very high level. We use a JDA-based system, including e3 for replenishment of our core product, and also JDA's Arthur Planning & Allocation solution. Then there's the second challenge. Whereas a specialty player such as Ann Taylor or Chico's has a very well-defined market -- a customer of a certain age and shopping patterns, with so much income, etc. -- the only commonality among our customers is that they are big and tall. They can be 18 or 70 years old, of varying demographics, and we have just 3,500 square feet in which to service them.
Previously, we were giving every store the same assortments, even though some did 5 percent of their sales in young men's wear, and others did 30 percent in that category. The only way to win at this is first, to get the right merchandise in each store -- that's where the clustering starts to take place -- and second, to speak to the customer by marketing to these clusters. Recently we implemented Marketworks, which is allowing us to identify customers by cluster and speak to them in their own language. We don't want to send a flyer about a wardrobe sale to a 25-year-old kid who comes to our stores to buy T-shirts and jeans. It's a waste of money. We can now maximize and pinpoint our marketing for a much higher level of efficiency. Previously, we took a shotgun approach, blasting our marketing out there and getting very low return rates. If we sent out a coupon and we got back 50,000 coupons, we got back 50,000 coupons. Today, each coupon has an individual barcode that identifies the specific customer. Now, we also know the life history purchases of all of our customers, including how much they spend, how frequently they shop us. We know their favorite brands and colors, and if they are driven by promotions or will pay full price. Now we can really start to market to them. If we receive in a shipment of a certain product that Customer A likes, we can e-mail him to let him know. We can personalize it. In August we will launch our loyalty program, a homegrown system, which will be the driver behind all of this, because it will allow us to speak to that individual in a very personal way.

QLast year you launched a guaranteed in-stock program. How has that progressed? Have you had to give away a lot of merchandise?
AThe program guarantees that the product will be in stock in your size when you come in the store, and if not, we'll deliver it to your home within five business days at no charge. The program covered seven core products, including the pair of pants that has 49 sizes and three colors -- that's 147 SKUs right there -- and our bread-and-butter high volume items such as a pique polo, a pocket T-shirt and our oxford dress shirt. This is pretty staggering: From August to March we sold over a half a million units of those items, and we gave away just 13. We were prepared to give away thousands, which would have been okay, because we were trying to create credibility with customers. Because of our size management technology, we could predict by store what sizes we needed to have in that store -- obviously we can't put 49 sizes of three colors in 500 stores -- we only gave away 13, and those were the result of shipping errors. Physically, we had the ability for a 100 percent fill rate on 500,000 units.

QWhat's next? ANow that we understand big and tall, our strategy is to expand in all of its facets. We acquired Rochester Big & Tall, which caters to a higher end customer, and we just acquired a niche company, Jared M, which provides custom clothing to professional athletes, at a much higher level and price points than Rochester. It's a great opportunity. The customers are people of means who want an individual look. We're going to put these custom shops in Rochester stores, and launch a catalog and Internet business for Jared M. We think we know more than anybody about this business now, and we are always looking for other opportunities to leverage.

Jordan K. Speer is senior editor of Apparel. She can be reached at [email protected].

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