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Sponsored by COVER STORY By Jordan K. Speer 12 JULY 2012 • www.apparelmag.com aking a look at the most profitable apparel companies each year is quite revealing, not only about each individual business T and the apparel industry at large, but also about the economy in general, global trends, technology shifts and the overall zeitgeist. Last year found the Top 50 slowly unbundling themselves after the winds of the Great Recession. They were pulling off their scarves, unbuttoning the top few buttons and easing into a somewhat sunny Recovery, focusing on right- sizing their enterprises by examining everything — including brands, products, stores, distribution centers, real estate, people, messaging, social media, inventories, partners, suppliers, third-party providers and technologies — to figure out what sizes and combinations of these assets would best allow their businesses to grow and prosper. welve months on, we might call this the Year of Apparel Yin-Yang (we might call it that for two reasons, actually — see T No. 1 below) because of the balance that apparel companies are starting to achieve, most notably in the forms of: • Physical-Digital: Omni-channel is pushing the way to digital displays in stores and 24/7 shopping from mobile devices everywhere • International-Domestic: Global expansion, particularly in the BRIC countries, is set against slowing, but more strategic U.S. store growth, bringing us to • Refurbishment-New Construction: Some shuttering, a flurry of remodels and relocations is set against very considered new openings, including in smaller markets • Outlet-Full-line: The value-oriented economy is fueling a rise in outlet stores, even as the luxury customer is alive and well • Heritage Brands- National Labels: A thinning of legacy brands is making room for iconic, global best-sellers, and • Technology-People: Deployments ranging from behind-the-scenes IT systems to customer-facing mobile technologies are balanced by the increasing comprehension that without well-trained, enthusiastic, happy and engaged employees at all levels, the technology will prove fruitless. #1 Zuoan What else should you expect in the Year of the Dragon? Whether its the auspicious powers and good luck brought on by this mythical creature; the “fashionable elegance” of its lifestyle brand and a design team led by chairman and CEO James Hong, nominated one of the top three fashion design- ers by the China Fashion Association in 2009; a manufactur- ing base close to its consumer base in a country of 1.3 billion people whose levels of disposable income are on the rise; or a different government and business environment from that of the United States that most contributed to Zuoan’s mete- oric debut on the chart after going public on the U.S. stock exchange last year, one thing is not debatable: This design- driven brand (Zuoan means “left bank” in Chinese, referring to Paris’ sophisticated Left Bank) has not only taken the top spot, but done so with a profit margin higher than any ever reported on Apparel’s Top 50. The company, which targets fashion-minded, upwardly mobile males ages 20 to 40 with a mix of casual apparel, footwear and lifestyle accessories, sells its products in 1,295 stores (most of which are run by distrib- utors) throughout 29 of China’s 32 provinces and municipali- ties. It outsources almost 95 percent of production but also maintains its own facility to control quality and also to pre- vent unauthorized disclosure of its most new and fashion- forward products. www.apparelmag.com • JULY 2012 13 THE TOP 50 #2 lululemon athletica If lululemon’s soaring profits are any measure of its stated mission to “elevate the world from mediocrity to greatness,” then it must be doing a bang-up job. The yoga and running wear specialty retailer took its profit margin from an already astounding 17.1 percent to 18.4 percent in fiscal 2011, but to listen to its executives or take a turn around lululemon.com, you wouldn’t know prof- its even figured into its corporate strategy. CEO Christine Day talks about helping guests, communities and educators “to build the lives they love to live,” while the web site offers words of inspiration, information about lulule- mon’s inaugural half marathon The SeaWheeze (Aug. 11 in Vancouver, for all you runners out there) and tips on “how to do a side crow” yoga pose. While focusing on elevating the world, this Wall Street darling opened 33 stores in the United States and Canada for a total of 155, and grew its direct-to- consumer business from 8 percent to 11 percent of net revenue. In 2012, the company will open approximately 30 new stores in the United States and Canada and five in Australia and New Zealand. In January, founder and chairman Chip Wilson left his post as chief innovation and branding officer, but continues as chairman. #3 The Buckle No need to buckle up for this ride, as this denim specialty retailer easily holds steady in the top three while surpassing $1 billion in sales for the first time, increasing average transaction value 5.3 percent to $103.45, increasing average price point 4.6 percent to $48.00 — and selling more than 5 million pairs of jeans. The 431-store chain remodeled 24 stores, opened 13, and redesigned buckle.com to offer enhanced resolution and navigation, also adding online product ratings and reviews to its fashion videos, tips and blog — contributing to online sales growth up 25 percent, to $78 million. With its emphasis on personalized attention to its customers, indi- vidual services including free alterations, layaways and a frequent shopper program — and more than 1,000 styles from more than 20 brands, including its own private label, which accounted for approximately one-third of fiscal 2011’s sales — The Buckle clearly is fulfilling its mission “to create the most enjoyable shopping experience possible for [its] guests.” It also doesn’t hurt that The Buckle’s leadership — chairman of the board Dan Hirschfeld, president and CEO Dennis Nelson and vice president of sales Kari Smith — have a combined tenure of more than 102 years with the company! #4 Francesca’s Collections Debuting at the top of the chart after going public last year seems to jive with the first part of its motto, “Think Big, Act Small.” Targeting the 18- to 35-year-old, fashion-conscious female, the specialty retailer, which grew revenues by 51 percent, comps by 10.4 percent and turned in an operating margin of 22.7 percent, is “delighted when a customer is surprised that there is more than one francesca’s.” That’s because the company — which added 76 locations last year for a count of 283, plans to add another 75 this year and looks to triple the count to approxi- mately 900 in the next seven to 10 years — doesn’t have stores; it has “boutiques,” each of which is designed to offer a unique and “locally owned” atmosphere that is not at all suggestive of a national chain. That’s a tall task to accomplish, but one that francesca’s seems so far to be mastering by offering a broad but shallow, eclectic and differentiated assortment of merchandise ranging from apparel to gift items; carefully selecting its boutique locations; and empowering managers to use their creativity. Meanwhile, behind the scenes, francesca’s recently replaced its merchandise management system with a new scalable platform, and this year begins implementation of a new point-of-sale system while also relocating and expanding its current DC and corporate offices. 14 JULY 2012 • www.apparelmag.com Is Your Company on the Apparel Top 50 List? Learn why more companies who select NedGraphics versus any of the alternatives are on the list. Exploding Marketshare The number of companies in The Apparel Top 50 using NedGraphics has increased by over 350%. Adobe Solutions Partner NedGraphics is very proud to be selected as the Adobe Solutions Partner for our industry, in recognition of our market leadership. Innovation and Value NedGraphics continues to lead the market with the worldwide release of Version 13, coming this summer. For a product overview, call us 212-921-2727 or email: [email protected]. www.NedGraphics.com Inspiring Creativity. THE TOP 50 #5 Casual Male Retail Group Taking the award for the biggest leap up the Top 50, 31 places from No. 36 last year, the largest specialty retailer of men’s big and tall apparel successfully expanded its new superstore concept, DestinationXL™, to 24 locations, and launched its e-commerce site. Launched in 2010, DXL houses merchandise from Casual Male XL, Rochester Clothing, B&T Factory Direct and Shoes XL, and fig- ures centrally in the company’s strategy to capture closer to 17 percent vs. its current approximate 11 percent share of the $3.5 bil- lion to $4.0 billion big and tall market by offering more variety in one place. Specific opportunity has been flagged in the lower-size range of its market — men with 42” to 46” waist sizes, who fall in the high end of the size range for most traditional retailers, but have been reluctant to shop at Casual Male stores. In offering a greater selection and more brands than are typically found else- where in this “smaller” size, the company is looking to capture this niche audience. Casual Male expects its first franchised DXL store to open in Kuwait in April 2012. #7 Nike Grabbing the No. 7 spot two years running, this sports powerhouse pulled in almost $21 billion in rev- enue and president and CEO Mark Parker revised its 2015 goal upwards to $28 billion to $30 billion.