With today’s departure of its misbegotten, short-lived fashionista
CEO, retailer Lands’ End has a chance to right its past wrongs and rise again. But can it do it? Will it, for example, follow the path of a resurgent Apple, or that of its former owner, Sears, thought by some to be near bankruptcy?
Lands’ End retailer was once a successful and popular seller
of well-made and comfortably-fitting casual clothing. It was founded in Chicago initially as a
seller of sailing gear and gradually transformed itself into primarily a clothing
retailer. It expanded with a move to
southern Wisconsin and became a strong national brand.
Then disaster struck.
The first blow was its sale to Sears in 2002.
Quality took a sharp dive no doubt as the accountants squeezed the
bottom line. At the time Sears took over
I think most of my dress shirts, polo shirts, neckties, and casual pants, and
all my socks and underwear, were from Lands’ End. My wife was also a big customer in clothing for
not only herself but for our kids, and household stuff like bedding and towels was
mostly from LE. But with new purchases
after the Sears takeover we noticed gradually cheapening fabric, poorer fit,
and declining quality. We began buying
less and less.
Finally Sears, struggling itself, released Lands’ End from
bondage in April, 2014, spinning it off as once again a stand-alone company. Then a remarkable thing happened. The new Board of Directors decided to abandon
the company’s deservedly eroding customer base and transform itself into a retailer
of “fashion forward” trendy hipster clothing.
It hired an Italian fashionista of the New York City glitterati set to
pursue the transformation. Out were
comfortable shirts and shoes and rain gear and in were stiletto heels. The new CEO, Federica Marchionni, wondered,
peering westward and downward across the Hudson River from her Manhattan penthouse,
Bellini in hand, just who in the hell would actually wear the clothes Lands’
End was selling.
Then came the coup de
gras for long-suffering Lands’ End. To
signal their bona fides to all the right people – the bicoastal liberal elites and hipster
glitterati – the new CEO and the Board decided to enter the Culture Wars. Lands’ End celebrated one of the most
polarizing figures in America – ultraliberal, radical “feminist” and abortion
extremist Gloria Steinem, who once is said to have said that a woman needs a
man like a fish needs a bicycle. The special,
prominent catalog homage to Steinem was a marvel of incoherent incompetence – celebrating
a woman likely to be anathema to its core customers and utterly unfamiliar to the
sought-after young urban hipsters. Negative
reaction was swift, and I posted a note about the disaster at the time (link). In comments to articles all over the web,
outraged customers, those still left, vowed to abandon Lands’ End. Although my family’s purchases were way down
from a decade earlier and gradually declining, we were still occasionally
buying some things like sheets and jackets.
That came to an abrupt end and we were done with Lands’ End.
In late July, LE reported results for the three-month period
February through April of 2016, the first financials after the late-February
celebration of Gloria Steinem. As only two
of the three months in that period were after the catalog’s appearance, the
full effect of the Steinem glorification and taking sides in the Culture War is not reflected in these
numbers. Here is the bottom line – LE reported a net loss of
$5.8 million, compared to a profit of $1.7 million in the year earlier
period. All in all, a disastrous
financial report.
Now today, nine months almost to the day after that
ill-fated adulatory splash on Gloria Steinem, the hipster, fashionista CEO is
out. She lasted 21 months.
The Lands’ End stock price also tells a sad tale. From February 27, 2015, the last trading day
of the month that Marchionni took over as CEO, through September 23, 2016, the last
trading day before today’s announcement of her departure, Lands’ End stock was down 51%. In other words, in the short
time that the new hipster CEO was in place, Land’s End stock lost more
than half its value. Furthermore, at the
close of trading today on the day of the announcement, LE stock dropped another
14%, investors no doubt fearing that the not-yet-reported recent financials are
even worse than imagined given the firing of the CEO. Losing two-thirds of a company’s stock value
in 21 months is not easy, but the LE Board has managed to pull it off.
The articles I’ve read in the past year on this ongoing
story typically spun the Lands’ End problem as one of rubes in the hinterlands bitterly
clinging to their “frumpy duds” and refusing, like truculent children, to
follow the lead of a sensible NYC fashion leader who is simply trying to help
them improve themselves. Rarely a
mention of the Gloria Steinem contretemps, of course. Example: a Marchionni-admiring Wall Street
Journal article of May, 2016, is subtitled “At the catalog retailer, frumpy
duds are out.” The Board of Directors
apparently buys into all this nonsense.
The sorry saga of Lands’ End, damaged first by Sears and
then bled further by an incompetent Board and CEO, provides a well-worn cautionary
tale for American business. It’s as
Barack Obama, no doubt a role model for the now departed elitist, hipster LE CEO,
once said – “don’t do stupid stuff.” But
as Obama has failed to learn over and over and over again, to America’s
detriment, that's easier said than done. The
Lands’ End saga shows us, not that we really need yet another demonstration, that not being
stupid is, for some people, harder than it looks. Can the Lands' End Directors fix their own stupidity? We’ll see. They could take a promising first step by all
resigning.
R Balsamo
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